Wealth Transfer and Potential for Philanthropy
Boston Metropolitan Area
Technical Report
John J. Havens
Paul G. Schervish
Center on Wealth and Philanthropy
Boston College
March 2013
___________
We are grateful to the sponsors of this study (the Boston Foundation) for their support of
our work on wealth transfer and the potential for charitable giving. We also wish to
acknowledge the Impact Foundation of North Dakota for sponsoring the update of our
Wealth Transfer Model in 2011 that facilitated the current study. We appreciate the
efforts of Lisa Kaloostian, James Gu, Shelby Garber, and Alexandra Robbins – all
working at the Center on Wealth and Philanthropy at Boston College - in the collection of
data for the study and in the production of this report.
2 Introduction
This technical report documents work performed at the Center on Wealth and
Philanthropy at Boston College from the summer of 2012 through October 2012. This
study focuses on household wealth, its transfer, and the potential charitable giving for
households residing in the Boston metropolitan area in 2007, the base year of the study.
The timeframe of the transfer extends from 2007 through 2061.
In 2005 we completed a similar study sponsored and released in 2006 by the Boston
Foundation that estimated wealth transfer in the Boston metropolitan area from 2001
through 2055. Adjusted for inflation to 2007 dollars, it found that aggregate household
wealth in the Boston area was approximately $1.06 trillion in 2001; aggregate wealth
transfer from 2001 through 2055 was $1.33 trillion if wealth grew at 2%, $2.41 trillion if
wealth grew at 3%, and $4.56 trillion if wealth grew at 4%. Similarly, during the same
period, potential giving to charity amounted to $381 billion (2% growth), $686 billion
(3% growth), and $1.387 trillion (4% growth).
In contrast, the current study finds that in 2007 that aggregate household wealth in the
Boston metropolitan area had grown at an average annual real rate of 4.1% per year since
2001 to reach $1.35 trillion; even at its recessionary nadir in 2009 it amounted to $1.11
trillion (in 2007 dollars) – still above its 2001 level. Depending on estate tax policy and
growth rates, we project that from 2007 through 2061 aggregate wealth transfer in the
Boston area will range from $0.95 trillion to $0.97 trillion if wealth grows at 1%, $1.47
trillion to $1.52 trillion if wealth grows at 2%, $2.35 trillion to $2.44 trillion if wealth
grows at 3%, and $3.83 trillion to $3.99 trillion if wealth grows at 4%. Moreover, we
project that giving to charitable causes from household financial resources during lifetime
will amount to $297 billion to $299 billion (1% growth), $397 billion to $400 billion (2%
growth), $541 billion to $546 billion (3% growth), and $751 billion to $759 billion (4%
growth).
This report focuses on household wealth transfer and presents three sets of findings:
1. the distribution of household wealth in the Boston (core based) metropolitan area
in the baseline year of 2007 as well as the subsequent three years (2008, 2009,
and 2010);
2. the transfer of wealth from Boston metropolitan area households and the
distribution of that wealth to government, charitable causes, heirs, fees, and other
entities (e.g., trusts) in the relatively near future (2007 through 2026) and during
the longer time frame (2007 through 2061); and
3 3. the potential for charitable giving by Boston metropolitan area households both in
the relatively near future (2007 through 2026) and during the longer time frame
(2007 through 2061).
The transfer of wealth and the potential for charitable giving are developed for eight
scenarios defined in terms of four long term growth rates (1%, 2%, 3%, and 4%) and two
federal estate tax regimens (current law that sunsets at the end of 2012 and current rates
that continue the estate tax provisions in place in 2012 indefinitely into the future). Each
of the scenarios incorporates the major provisions (exemption level, charitable and
spousal deductions, and marginal rates) of Massachusetts’s estate tax in effect in 2012 in
addition to corresponding provisions of the federal estate tax.
The effect of the recession is captured in the distribution of household wealth in the
Boston area from 2007 through 2010. As in the nation as a whole, Boston area
households in every level of household wealth lost at least 14% of their wealth from 2007
through 2009. Households near the bottom of the distribution lost proportionally more
than those near the top of the distribution because their debt to asset ratio was higher than
the same ratio among households at the upper end of the distribution.
In terms of the value of the losses, households near the bottom of the distribution lost
smaller amounts per household than those near the top of the distribution, since
households near the bottom of the distribution owned assets of lesser value, on average,
as compared with households at the upper end of the distribution.
After adjustment for reduced valuations and portfolio composition, these distributions of
household wealth were integrated into our analysis and the derivation of our findings.
The findings were thus adjusted for the impact of the recession on the wealth of Boston
metropolitan area households.
This study defines the Boston metropolitan area to be the geographic area designated by
the U.S. Census and Office of Management and Budget as the Boston Core Based
Statistical Area (CBSA) in 2007, which includes the counties of Bristol, Essex,
Middlesex, Norfolk, Plymouth, Suffolk, and Worcester.
Unless otherwise noted, all dollar figures in this report have been adjusted for inflation to
2007 dollars.
Executive Summary
In 1999 the Center on Wealth and Philanthropy (CWP) released “Millionaires and the
Millennium: New Estimates of the Forthcoming Wealth Transfer and the Prospect for a
Golden Age of Philanthropy.” In it we conservatively estimated that national wealth
transfer in the 55-years from 1998 to 2052 would amount to $40.6 trillion in 1998 dollars,
which translates into $52.0 trillion in 2007 dollars.
4 During the summer of 2011 the Center on Wealth and Philanthropy updated and extended
our Wealth Transfer Microsimulation Model (WTMM) and used it to produce new
national estimates of wealth transfer and household charitable giving for the 20-year
period of 2007 through 2026 and also for the 55-year period from 2007 through 2061.
Estimates were produced for 8 scenarios defined in terms of four growth rates (1%, 2%,
3%, and 4%) and two estate tax policies (current law and current rates). The current law
scenario reflects the Federal Estate Tax law on the books at the time of the analysis. It
sunsets at the end of 2012 and rates and other provisions of the estate tax return to their
2001 values except the exemption is $1 million. The current rates scenario continues the
estate tax provisions that apply to estates during 2011 (pre sunset) into the future; there is
no sun setting after 2012 so the $5 million exemption adjusted for inflation continues
after 2012.
Wealth Transfer and Potential Charitable Donations and Transfers in the Boston
Metropolitan Area
We estimate that in the near-term period from 2007 through 2026, inclusive, the Boston
metropolitan area households will transfer between $407 billion to $603 billion (2007
dollars) of wealth through bequests to heirs, estate taxes, charitable bequests, estate
closing costs, and to other entities (e.g., trusts and partnership arrangements). In the
longer period from 2007 through 2061, inclusive, the estimates range between $950
billion to $3.994 trillion (2007 dollars) in wealth transfer. The amount of the transfer
depends primarily on the secular real rate of growth in wealth during each period (1%,
2%, 3%, or 4%) as well as the estate tax provisions in the scenario.
We also estimate that between $168 billion and $240 billion will be donated or
transferred to charitable causes by Boston metropolitan area households in the near-term
20-year period and between $419 billion and $1.629 trillion will be donated or transferred
to charitable causes by Bostonians in the longer-term 55-year period. These donations
and transfers will consist of donations along baseline trend, accelerated giving, and
charitable bequests.
Current patterns of inter vivos giving by Boston metropolitan households were projected
along trend in an analysis independent of the wealth transfer model. We refer to this
projection as donations along baseline trend. Accelerated giving consists of charitable
contributions in addition to giving along trend. This giving is mostly done by affluent
and wealthy donors through charitable and non-charitable trusts and family foundations
in conjunction with estate planning and concomitant adjustments in portfolio
composition. Charitable bequests are bequests made to charitable organizations through
estates after the death of the donor.
The amount of each of these three categories of giving depends on both the secular rate of
growth in wealth during each period and also on the provisions of the estate tax code in
force at the time of death. Within each growth rate, current rates produce greater
5 amounts allocated to charitable causes as compared with current law (i.e., rates that apply
after the sunset provisions of current estate tax law).
Impact of the Recession on Wealth Transfer
In Boston, the recession reduced the value of wealth transfer by 11 percent to 25 percent
in the 20-year period and by 15 percent to 31 percent in the 55-year period. The
difference in the percentage reduction was due both to the secular rates of growth and the
degree to which the recession affected the initial distribution of household wealth in the
Boston area. Depending on the scenario the Boston metropolitan area will lose between
$53 billion and $202 billion in wealth transfer in the 20-year period due to the recession
and between $165 billion and $1.796 trillion in the 55-year period, depending on the
scenario.
From publicly available data we are able to estimate how the recession affected the
distribution of wealth for Bostonians and how this reduction in their wealth subsequently
affects the value of their assets transferred in the future.
The time frame of the study begins in the days immediately preceding the recession and
the following loss of wealth, jobs, financial security, and consumer confidence that
affected Boston area households as well as most households throughout the country. The
back story that provides the context for the focus of the current study (wealth transfer and
charitable giving) is the transition from the growth of household wealth, employment,
and income1 in 2007 to the precipitous decline in household wealth, the accelerated
increase in unemployment, and the decline in both earned and unearned income
(including capital gains among Boston area householders) of the Great Recession of
2007. Since this is a study of wealth transfer, we focus on household wealth rather than
unemployment or income.
Assets owned by households fall into four categories: real estate, unincorporated
business equity, financial assets, and other (e.g., vehicles, fine art, precious metals,
options, and derivatives). The recession produced a steep decline in real estate, business
equity, major components of financial assets, and contribution defined retirement funds.
Some bonds (e.g., mortgage backed securities, issues of government sponsored
enterprises) also declined in value. Lack of credit and reduced consumer demand
resulted in lower market values for small, non-farm, unincorporated businesses and Scorporations.
1
Wealth is different than income. We measure wealth as net worth: the market value of all assets of
members of a household less all debt at a point in time. The value of a home, a 401k plan, a vehicle, or a
mutual fund is examples of assets. Mortgages, credit card balances, and student loans are examples of debt.
Income, on the other hand, is the flow of funds over a period of time. Examples of income include wages
and salaries, interest, dividends, rents received, unemployment compensation, and Social Security income,
among others.
6 Some bonds, used cars, and selected other tangible assets (excluding real estate)
maintained or increased their value at the start of the recession, but not nearly enough to
offset the decline in the other categories of assets.
In our analysis of wealth transfer, we tracked the value of assets and debt of all Boston
area households in 2007, in 2008, in 2009, and in 2010 based on asset valuations and
portfolio composition. In this way we adjusted for the impact of the recession.
On average, the aggregate value of household assets declined slightly more than 17
percent between 2007 and 2009 for the nation as a whole. At the same time, household
debt increased, on average, by about 0.5 percent. Consequently, national household
wealth (as measured by net worth) declined by about 21 percent both on average and in
aggregate during the recession.
In the Boston area, the aggregate value of household assets declined between 2007 and
2009 by approximately 15 percent – slightly less than the national average. Household
debt in the Boston metropolitan area increased about 5 percent during this period. The
aggregate and average household net worth in the Boston area declined by 18 percent
rather than the national decline of 21 percent.
By 2010 the value of household assets in the Boston area had started a slow recovery and
increased from 15 percent below their pre-recession level to 11 percent below their prerecession level; household debt had increased by 2.0 percent; and household net worth
had recovered from 18 percent below its pre-recession level to 14 percent below its prerecession level.
Scope of Reduction in Boston Metropolitan Area Wealth
Throughout the recession and early recovery (2007 through 2009), loss of household
wealth was pervasive: more than 91 percent of Boston area households suffered a decline
in their net worth, but some households lost more than others. In terms of the dollar
value of the decline, households with $1 million or more in wealth in 2007 lost $689
thousand per household, on average, or more than $164 billion in aggregate during the
recession. In contrast, households with less than $100 thousand net worth in 2007 lost an
average of $15.6 thousand per household ($10.9 billion in aggregate) during the
recession. In terms of dollar loss, therefore, the roughly 14 percent of households at the
upper end of the wealth distribution lost substantially more ($689 thousand per household
more) than the roughly 41 percent of households in the lower end of the wealth
distribution.
However, the impact of the loss was reversed if measured in terms of percentage of
wealth. In this metric, the roughly 14 percent of Boston area households with net worth
of $1 million or more in 2007 lost about 15.9 percent of their wealth on average and in
aggregate during the recession. In contrast, the roughly 41 percent of households with
net worth less than $100 thousand in 2007 lost slightly more than 76.7 percent of their
wealth on average and in aggregate during the recession. It’s worth repeating this
7 important finding: 41 percent of Boston area households lost more than three-quarters
of their wealth during the recession2.
A major reason for this disparity in percentage loss of wealth among the metropolitan
area households involves the debt to asset ratios of each of these groups. In 2007 the
ratio was below 7.2 percent for the group of households at the upper 14 percent of the
distribution but more than 71.3 percent for the group of households in the lower 41
percent of the distribution. As the value of assets declined during the recession, the value
of debt did not. As a result, those households in the lower part of the distribution lost a
much larger fraction of their wealth as compared with those at the upper end of the
distribution – although households throughout the distribution lost wealth.
Recessionary Impact on Charitable Giving and Wealth Transfer in the Boston
Metropolitan Area
The recession had a major impact on the charitable giving of Boston area households. In
2007 Bostonians donated an average of $2,420 (21 percent above the national average of
$1,994 per household) to charity. By 2009 the Boston area average had declined by 23
percent to $1,861 per household (9 percent above the national average of $1,710 per
household). Since the proportional reduction of wealth was smaller among the wealthy
households that donate the most to charitable causes and that account for the majority of
wealth transfer as compared with households at the lower end of the distribution, the
recession’s impact on wealth transfer and charitable giving was somewhat attenuated.
Incidence of Wealth Transfer before Death
In recent years there has been an increase in transfers of assets during lifetime in
conjunction with estate planning and transfers to heirs and other entities. Based on
analysis of successive independent samples of affluent individuals from the Federal
Reserve, there is an increasing amount of assets transferred out of the household
portfolios of affluent and wealthy households headed by people age 65 to 79. This
transfer was not evident before the millennium. This pattern of transfer is increasing in
frequency over time since then and also increasing in amount at successively higher
levels of household wealth.
Anecdotal evidence supports the growth in this pattern. From wealth advisors and
financial planners, we are told that more assets are being transferred via trusts,
partnerships, direct gifts, and other vehicles of transfer during the lifetime of wealth
holders than was the case 10 to 15 years ago. In addition, statistics indicate a major
increase in the asset values of private foundations, donor advised funds, split-interest
trusts, and living trusts from 1997 through 2007.
2 Boston
area households below the area’s median ($170,250) wealth in 2007 lost 51 percent of that wealth,
on average, during the recession; Boston area households at or above the state’s median lost 17 percent of
that wealth (households above the median but below the wealthiest 10 percent lost an average of 20
percent).
8 We do not have good data on the final destination of these assets because they are not
publicly available. We do have Federal Reserve data that indicates that inheritances
received in recent years are consistently higher than is implied by estate tax data from the
IRS. This fact supports the proposition that some assets are being transferred to heirs by
means other than estates during the lifetime of wealth holders.
Although we cannot identify the recipients with precision, we can estimate the value of
total lifetime transfers and we can also estimate the amount of this value that is donated
to charitable causes. In our current analysis, we expanded the concept of wealth transfer
to include these lifetime transfers of assets and we have expanded our wealth transfer
model to include such transfers made in conjunction with major changes in the
composition of the portfolios of wealth holders near traditional retirement age.
In the Boston metropolitan area the lifetime transfer of assets accounts for about 13
percent to 17 percent of the transfer; final estates (estates of never married, divorced, or
widowed decedents) account for the remaining 83 percent to 87 percent of the transfer.
Final Estates
We use the term final estate to mean an estate with no surviving spouse. It is the same as
the IRS designation of an estate with an unmarried decedent.
In all scenarios, the value of lifetime transfers plus accelerated lifetime giving is
approximately 13 percent to 17 percent of the total wealth transfer in the Boston
metropolitan area; the remaining 87 percent to 83 percent is transferred via final estates.
As shown in Table 14, at 1 percent growth from 2007 through 2061 we estimate the value
of Boston metropolitan area final estates to be $827.5 billion if estate taxes revert to 2001
provisions with $1 million exemption after 2012 and $842.6 billion if estate taxes remain
at their 2011 provisions with a $5 million exemption. At 2 percent growth, the
corresponding estimates are $1.258 trillion and $1.290 trillion, respectively.
At 3 percent growth, the corresponding estimates are $1.983 trillion and $2.048 trillion;
and at 4 percent growth, the estimates are $3.206 trillion and $3.320 trillion.
The value of final estates is distributed to estate taxes (state and federal), charitable
bequests, bequests to heirs, and estate closing costs. The estate tax provisions have a
large impact on this distribution. In the 1 percent scenario, the distributed amounts are:
$36.1 billion in Massachusetts estate tax liabilities, $165.7 billion to federal estate taxes,
$121.6 billion to charitable bequests, $486.6 billion to heirs, and $17.5 billion to estate
closing costs – if estate taxes revert to 2001 levels after 2012. The distributed amounts
are: $36.9 billion in Massachusetts estate tax liabilities, $50.5 billion to federal estate
taxes, $148.5 billion to charity, $588.8 billion to heirs, and $18.0 billion to estate closing
costs – if estate tax provisions remain at their 2011 configuration after 2012. It should be
noted that the current provisions of taxation lead to less transfer to the government and
more to charity and heirs than is the case if estate taxes revert to their 2001 levels.
9 In the 2 percent scenario, the distributed amounts are: $58.9 billion in Massachusetts
estate tax liabilities, $288.9 billion to federal estate taxes, $175.2 billion to charitable
causes, $709.4 billion to heirs, and $26.1 billion to estate closing costs – if estate taxes
revert to 2001 levels after 2012. The distributed amounts are: $60.9 billion to
Massachusetts estate tax liabilities, $72.2 billion to federal estate taxes, $227.6 billion to
charity, $902.8 billion to heirs, and $26.8 billion to estate closing costs – if estate taxes
remain at their 2011 levels after 2012.
In the 3 percent scenario, the distributed amounts are: $106.4 billion in Massachusetts
estate tax liabilities, $523.9 billion to federal estate taxes, $322.0 billion to charitable
causes, $992.6 billion to heirs, and $38.7 billion to estate closing costs – if estate taxes
revert to 2001 levels after 2012. The distributed amounts are: $111.1 billion in
Massachusetts estate tax liabilities, $130.7 billion to federal estate taxes, $441.3 billion to
charity, $1.325 trillion to heirs, and $39.9 billion to estate closing costs – if estate taxes
remain at their 2011 levels after 2012.
In the 4 percent scenario, the distributed amounts are: $200.4 billion in Massachusetts
estate tax liabilities, $933.7 billion to federal estate taxes, $629.2 billion to charitable
causes, $1.385 trillion to heirs, and $58.4 billion to estate closing costs – if estate taxes
revert to 2001 levels after 2012. The distributed amounts are: $209.7 billion in
Massachusetts estate tax liabilities, $269.8 billion to federal estate taxes, $870.2 billion to
charity, $1.910 trillion to heirs, and $60.4 billion to estate closing costs – if estate taxes
remain at their 2011 levels after 2012. In each of the four growth current levels of
taxation lead to less transfer to the government and more to charity and to heirs than is
the case if estate taxes revert to their 2001 levels.
Potential for Charitable Donations and Transfers
In each scenario, we estimated the potential charitable giving during the 55-year period.
There are three components to these estimates, one of which (baseline estimate along
trend) was independent of the wealth transfer analysis and two of which (accelerated
lifetime transfers to charity and charitable bequests) derived from the wealth transfer
projections. In the 1% growth scenario the sum of the three components amounts to
$418.9 billion if estate taxes revert to their 2001 levels after 2012 and $447.2 billion if
estate tax provisions remain at their 2011 configuration. The corresponding estimates are
$572.3 billion and $627.3 billion, respectively, at 2% growth; $863.1 billion and $987.2
billion at 3% growth; and $1.380 trillion and $1.629 trillion at 4% growth.
In each instance potential for charitable giving is greater under current estate tax
provisions than were the provisions revert to their 2001 configuration (with $1 million
exemption).
In all scenarios, the value of lifetime giving (lifetime giving along trend plus accelerated
lifetime giving) declines from 31 percent of wealth transfer in 1 percent growth scenarios
to 19 percent in 4 percent growth scenarios.
10 Wealth Transfer is Top Heavy
It is important for the reader to note that in all scenarios the wealth transfer is wealthdependent, in the sense that most of the transfer is made by a small percentage of
households whose wealth was $1 million or more at the time of the transfer or at the
death of the wealth holder. In terms of final estates, 10 percent to 25 percent of these
affluent or wealthy households account for roughly 79 percent to 93 percent of the wealth
transfer through final estates in the 55-year time frame. Although wealth transfer will
affect all households, most households will transfer a modest amount.
With respect to charitable bequests, in all scenarios, final estates valued at $20 million or
more bequeath the largest amounts and the largest percentages of their estates to
charitable causes in comparison with final estates of lesser value. In general the greater
the wealth of the decedent the greater the proportion of their wealth, on average, is
transferred to charity, both during their lifetime and through their estates at death.
General Comments
Not surprisingly, the study found that lower estate taxes mostly affects the distribution of
the value of estates and results in less of the transfer going to government through taxes
and more to charity and heirs.
The analysis assumes that fundraisers and charitable causes continue their current level of
effort to obtain charitable donations and bequests. If their approach to fundraising
becomes more effective, they have an opportunity to increase the amount that goes to
charity well above our estimates.
Households at all levels of income and wealth give to charitable causes. Roughly half the
donations to charitable causes each year are made from households with less than $1
million in wealth; the other half are made from households with $1 million or more. The
majority of charitable bequests and almost all the gifts made through split-interest trusts
or similar vehicles of charitable giving are made by affluent or wealthy households.
Americans at every income and wealth level tend to identify with the needs of others in
society and try to help in ways that are appropriate to their circumstances.
Current Wealth Transfer Study
The current research study, conducted by the Center on Wealth and Philanthropy at
Boston College for the Boston Foundation, uses a new and expanded version of its
Wealth Transfer Microsimulation Model (WTMM) to provide estimates of wealth
transfer and lifetime charitable giving for households in the Boston metropolitan area.
11 The wealth transfer model used in the current study of wealth transfer in the Boston area
was updated and expanded during the spring and early summer of 2011 with support
from the Impact Foundation of North Dakota. Some of the updates included laying the
groundwork for expanding future capabilities. For example, mortality rates were updated
and the number of categories was extended to include Latino as well as Caucasian, Black,
and Other (Native American, Pacific Islander, and Asian).
Major Updates of the WTMM
There were four major areas for which the WTMM was updated:
1. Base Year Microdata File
The WTMM microdata file contains the representative sample of households and
all relevant information for the base year (2007) of the analysis. The file contains
a national sample of households, weighted to be representative of the population
in the base year. Each record in the file contains data on household wealth,
relevant components of that wealth, selected demographic characteristics, other
household financial data, and selected family characteristics.
The WTMM relies on this file for the distribution of wealth in the base year and
also the distribution of wealth by age in the base year. The first version of the file
was based on the Survey of Consumer Finances (SCF) for 1998. We updated this
file to the Survey of Consumer Finances for 2007, the most recent year for which
the survey was available at the time of the update. In updating the file, we also
updated the base year to 2007.
Sponsored by the Board of Governors of the Federal Reserve, the Survey of
Consumer Finances is a triennial detailed survey of household wealth and
components of wealth, household income and components of income, work
history, employment status, inheritance, charitable donations, and demographic
characteristics. The 2007 survey is based on a sample of 4,418 households
consisting of a nationally representative sample of 2,915 households and a second
oversample of 1,503 wealthy and very wealthy households. The Federal Reserve
carefully weights the two parts of the sample to be representative of the full
population of the country.
We calibrated the wealth in the SCF to match the aggregate estimate of household
wealth published by the Federal Reserve. We also expanded the WTMM to
adjust the wealth of each household in the microdata file in 2008, 2009, and 2010
to reflect the recession’s impact on wealth – as described in the section, “Recent
History of Household Wealth and the Recession.”
12 2. Mortality Rates
The WTMM uses mortality rates by age, race, and gender to actuarially determine
the timing and number of final estates. The most recently available mortality
rates (2007 Vital Statistics Report from the Centers for Disease Control and
Prevention) by age, gender, and race were installed in the WTMM. The race
variable was extended to include Latino along with Caucasian, Black, and Other
(Native American, Pacific Islander, and Asian).
3. Lifecycle Saving Rates
The WTMM relies on lifecycle savings rates to augment the growth of wealth
above the secular rate or to decrement the growth of wealth below the secular rate
depending on lifecycle state and wealth of the household. These rates measure
the average change in wealth for households at different periods of their lifecycle
as captured by age of head. Based on data from successive SCF surveys we reestimated the lifecycle savings rates by wealth of household and age of head.
These rates were then installed in the WTMM.
4. Estate Tax Distribution Parameters
The WTMM uses the estate tax distribution parameters to distribute the value of
final estates to estate taxes, charitable bequests, bequests to heirs, and estate
closing costs in the base year of the study. Thereafter, it modifies these values
based on an estate tax microsimulation sub-model.
The estate tax distribution parameters were updated to reflect the base year
distribution based on data from the Statistics of Income Division of the Internal
Revenue Service.
Major Expansions of the WTMM
The 2011 version of the WTMM contained five major expansions compared with the
prior version of the model:
1. Asset Groupings
Assets were grouped into four categories: real estate, other tangible assets (mostly
vehicles), business equity, and financial assets. In the expanded WTMM each
asset category can be assigned its own secular growth rate that permits, for
example, real estate to grow more slowly than business equity and business equity
to grow more slowly than financial assets. At some future date, the secular rates in
each category could be made time-dependent so that each asset category can be
represented as a time-dependent profile of annual growth rates.
13 2. Wealth Adjustments for Recession
The WTMM was expanded to adjust the values of household assets and debt to
historical values based primarily on changes in valuation of assets in each
household portfolio. These adjusted values supersede the secular growth rates for
the years in question. Thus the expanded model adjusts the valuation of each
household’s portfolio in 2008, 2009, and 2010 for the effects of the recession on
both the value and distribution of household wealth. This modification permits the
WTMM with a base year of 2007 to estimate wealth transfer during and after the
recession. After 2010 the model uses its original secular growth rates to estimate
household wealth.
3. Lifetime Transfers of Assets
The concept of wealth transfer was extended in the expanded version of the
WTMM to include transfers made to heirs and other entities through trusts and
other vehicles of asset transfer in conjunction with estate planning done during
lifetime.
Similarly the model itself was expanded to calculate the amount of asset transfers
during lifetime in addition to the amount of asset transfers at death. The sum of
these two components constitutes the WTMM estimate of wealth transfer.
The asset transfers during lifetime were estimated from portfolio analyses of
successive triennial Surveys of Consumer Finances. These transfers were further
divided into known transfers to charitable organizations (including family
foundations, charitable trusts, and donor advised funds) and transfers to other
entities that may also have entailed gifts to charitable organizations3 in addition to
transfers to financial vehicles such as trusts and limited family partnerships.
4. Estate Tax Simulation Sub-Model
An estate tax simulation sub-model was developed, tested, and installed in the
WTMM. This sub-model estimates tax liability for final estates (estates with no
surviving spouse) and also distributes the estate value among taxes, charitable
bequests, bequests to heirs, and estate closing costs. The estimates and the
distribution vary depending on the asset value of the estate.
This sub-model replaces the prior distribution algorithm that was based on
historical patterns of tax liability and distribution in the base year. The new submodel incorporates the base year distribution but modifies tax liability depending
3
The IRS data indicate that these trusts make charitable donations of several billion
dollars per year and that some of them are reorganized as charitable trusts each year. The
lifetime charitable estimate is therefore a conservative estimate.
14 on provisions of the estate tax law in effect at the time of death. Under current
law, the estate taxes will revert to a $1 million exemption, higher tax rates, and no
portability at the end of 2012. The new sub-model takes these changes into
account; the previous module did not.
5. Portfolio Reorganization
A portfolio reorganization module was developed, tested, and installed in the
WTMM. Major changes in the composition of portfolios take place typically at
ages 65 to 75 and mostly among affluent households. During this time,
households divest themselves of substantial amounts of real estate and business
equity and, to a lesser extent, financial assets as well. They also make major
lifetime transfers during this period of portfolio reorganization. The portfolio
reorganization module captures changes in portfolio composition as well as
estimating lifetime transfers of assets.
Expansion of the Model for Boston Area Analysis
The WTMM was customized and calibrated for estimation of wealth transfer in the
Boston Core Based Statistical Area (CBSA) as defined by the Bureau of the Census and
the Office of Management and Budget. There were 4 major areas of expansion and
calibration:
1. Boston CBSA Base Year Microdata File
The Boston area wealth transfer analysis relies on a microdata file that contains
the initial population and wealth characteristics of the Boston metropolitan area.
This file combines data from the Survey of Consumer Finances (SCF) sponsored
by the Board of Governors of the Federal Reserve and data from the demographic
supplement of the Current Population Survey (CPS), jointly conducted by the
Bureau of Census and the Bureau of Labor Statistics. The procedure requires that
both databases share a common year. The demographic supplement of the CPS is
collected in March, annually; at the time the analysis was conducted the most
recent survey data from the SCF was collected in 2007. Consequently 2007 is the
base year of this analysis.
This file was calibrated to the demographic characteristics and wealth
characteristics for the population of the Boston CBSA in 2007. It was
subsequently calibrated for the impact of the recession on asset valuations in the
state.
The resulting microdata file for the Boston CBSA forms the basis for estimation
of the initial distribution of wealth in the Boston metropolitan area, the age
15 distribution of wealth, and the estimation of wealth transfer in the Boston
metropolitan area.
2. Calibration for Recession
The WTTM was calibrated to the Boston CBSA based on data for 2007, 2008,
2009, and 2010 regarding real estate, home equity, and vehicles owned by
households in the Boston metropolitan area. We used national valuations for
publicly traded stocks, bonds, and other financial assets since their values tend to
be determined in national and international markets.
3. Simulation of Massachusetts Estate Tax
Massachusetts has an estate tax that is decoupled from the federal estate tax. We
developed a Massachusetts tax simulation module to estimate Massachusetts
estate tax liability based on the provisions (exemptions, deductions, marginal
rates, etc.) in place in 2011. This module was integrated with the federal estate
tax module to estimate state and federal estate taxes.
4. Customization of Parameters
Age, race, education, and homeownership characteristics for the households in the
Boston CBSA were adjusted to match their counterparts in Current Population
Survey for the base year of 2007. Lifecycle savings rates were customized to the
Boston CBSA by age, race/ethnicity, and wealth status.
5. Calibration of Charitable Giving
Independent estimates regarding charitable giving by residents of the Boston
CBSA in 2006, 2007, 2008, 2009, and 2010 were used to calibrate household
giving estimates produced by the model. These independent estimates were based
primarily on data from itemized deduction data from the IRS and non-itemization
data from the Panel Study of Income Dynamics for 2007 and 2009.
Scenarios of Wealth Transfer
The WTMM is a bottom up model: it generates its estimates on a household-byhousehold basis and adds the results together to obtain its aggregate estimates. In addition
to expanding the model, we also added a 1% growth scenario to our analysis repertoire.
We thus estimated and analyzed wealth transfer for growth scenarios of 1%, 2%, 3%, and
4% real rates of growth. There are separate sets of estimates for each scenario in the
analysis.
16 Within each of the four growth scenarios there are two tax sub-scenarios: the current law
in which the rates and provisions are sunset and revert to the 2001 tax code with $1
million estate tax exemption after 2012, and a second tax sub-scenario in which the 2012
tax provisions (with $5 million tax exemption) – current rates - remains in effect after
2012. Altogether we developed national wealth transfer estimates for 8 scenarios, 4
growth rate scenarios times two sub-scenarios of estate tax codes. It is not clear which
scenario best portrays the future. We therefore present the estimates for all 8 scenarios.
Robust Economy in Massachusetts and Boston Metropolitan Area
Relative to the nation, the Massachusetts economy has been robust for most of the past 14
years, during which time real GDP rose from $270.0 billion (2007 dollars) in 1997 to
$370.2 billion (2007 dollars) in 2011– an average real annual growth rate of 2.3%. This
growth rate was sustained even though the dot com recession of 2001 and the recent
2007-2009 great recession occurred during this period. In fact, the growth in GDP was
greater in Massachusetts in contrast to the 2.1% national growth in GDP during the same
14 years. Economic growth is important to wealth transfer because the long term rate of
growth in GDP tends to coincide with the rate of growth in household wealth and wealth
holders with at least $1 million in wealth contribute roughly half of all charitable
contributions nationally and more than half of all contributions in Massachusetts.
During the period from 1997 to 2011 the structure of the state’s economy slowly shifted
away from manufacturing and toward the research, technical, and scientific sector and the
financial sector. Of course education, especially higher education, and health care
services also grew proportionately larger. However, in recent years - since 2009 manufacturing centered on computers, electronics, and high technology manufacturing
has experienced a boom let in Massachusetts. The structure of the economy is important
because employees in the research, technical, scientific, financial, education, and health
care sectors tend to contribute more to charity than employees of other industries in the
private sector.
The growth in the state’s economy was reflected in the personal income of its residents.
On average the state’s real aggregate personal income (including capital gains) grew at an
average annual rate of 1.7% from $265 billion ($42.520 per capita) in 1997 to $337
billion ($51,180 per capita) in 2011. Although the 2% rate of growth in real personal
income was higher for the nation than the 1.7% experienced in Massachusetts, the real
unearned income per capita was consistently higher in Massachusetts than in the nation
during this period.
Personal income along with wealth comprise the financial resources that results in
charitable contributions and charitable bequests. The unearned part of income (e.g.,
interest, dividends, rents, royalties, and capital gains) is more strongly related to the
magnitude of charitable giving than other income components.
Real aggregate unearned income grew at an average annual rate of 0.5% from $62 billion
($9,961 per capita) in 1997 to $66 billion ($10,035 per capita) in 2011. The rate of
17 growth in aggregate unearned income was higher in Massachusetts (0.5%) as compared
with the nation (0.2%). Throughout this period unearned income per capita was at least
20% higher in Massachusetts than in the nation.
In the 14 years from 1997 through 2011, the unemployment rate in Massachusetts
averaged 5.1%, which was lower than the national average of 5.8% during this time.
Low levels of unemployment are associated with higher levels of financial resources and
higher rates of growth in those resources and higher amounts of charitable giving.
In 2007, the base year of the current study, two-thirds of the households in Massachusetts
were residents of the Boston Metropoitan Area (i.e., the Boston CBSA). However, these
residents received roughly 75% of the household income and slightly more than 75% of
the household wealth of Massachusetts. Although less detail is available from federal
data for the CBSA than for the state, the real GDP of the CBSA grew at 2.4% from 1997
through 2011. During this period income per capita was 7% to 8% greater in the CBSA
than for the state, and income per capita grew at a real annual rate of 1.8% in comparison
of 1.7% for the state. Moreover, the average unemployment rate was 4.8% for the CBSA
in contrast to 5.1% for the state and 5.8% for the nation. These data serve to document
that the Boston Metropolitan area is the center of economic vitality within the state.
Since 19874 household wealth has grown nationally at a real rate of 2.4%, and real GDP
has also grown nationally at 2.4%. As noted above household wealth and GDP tend to
grow at similar rates over the long run, although the two rates are not always identical.
they tend to be close to each other. Even during recessionary times, the real GDP in the
Boston metropolitan area has grown also grown at 2.4% from 1997 through 2011. We
therefore emphasize the 2% real growth scenario for Boston area, although this is a
conservative choice. The lower 1% growth rate is likely pessimistic; the higher 3%
growth rate is probably an optimistic choice; higher rates seem exuberantly optimistic.
Nevertheless, our Boston area estimates of wealth transfer during lifetime and through
estates at death include estimates for all four growth rates. As in the nation, the more
wealth Bostonians transfer during lifetime the less wealth they transfer through estates at
death. Moreover, our portfolio analysis of successive Surveys of Consumer Finances
indicates that the greater the wealth of a household the greater amounts of wealth are
transferred during lifetime and thus less wealth is transferred through estates at death.
In the following sections we report our findings for the 20-year period from 2007 through
2026, inclusive, and also for the 55-year period from 2007 through 2061, inclusive.
Assumptions of the WTMM
The WTMM assumes that in the base year the distribution of household wealth in the
Boston CBSA is represented in its micro data file. It further assumes that this wealth will
4 This is the earliest year for which GDP data series are available for Rhode Island; we report the national numbers starting with this year for comparability. 18 grow at a constant secular rate as stated in the scenario but that this rate will be adjusted
for life cycle savings depending on the age of the head of household.
The model is based on the household population in the Boston CBSA in 2007. There are
no marriages or new businesses created in the model; however, there are deaths of
householders and limited divestiture of business assets in the WTMM through portfolio
reorganization and lifetime transfers of assets. The model does not account for migration
or immigration, although its estimates could be adjusted for independent estimates of
such population flows.
The model assumes that assets of a married decedent pass to their spouse and are only
distributed to government, charitable causes, heirs, and estate closing costs when the
surviving spouse dies.
The original model assumed that estates would be distributed to estate taxes, charitable
bequests, bequests to heirs, and estate closing fees based on IRS base year statistics by
asset class. The expanded model starts with this same distribution for the base year but
adjusts the values based on a new state and federal estate tax simulation sub-models, as
described above.
Running the WTMM in Context of the Recession
In 2007, 1.723 million households in the Boston metropolitan area owned $1.351 trillion
in wealth: about 43% in tangible assets (mostly real estate), about 18% in business equity
and 39% in financial assets. Household debt was approximately 13% of the value of
assets. This compares with the national composition of household portfolios for 2007:
45% in tangible assets, 19% in business equity and 36% in financial assets. Nationally
household debt was 16% the value of assets.
On a national basis wealth was growing robustly in 2007, but there were signs of the
looming recession: the housing market was already in decline and housing prices were
falling. However, offsetting the real estate market, financial markets were rising for most
of the year. The DOW reached a peak of 14,164 on October 9, 2007. Thereafter the
financial markets began their rapid slide down to a DOW floor of 6,547 on March 9,
2009. In addition, the housing market continued to deteriorate through this period and
may only now be reaching bottom.
National trends in household wealth mirrored the real estate and financial markets.
Federal Reserve data indicates that the amount of household wealth was fairly steady at
$58 trillion through the first three quarters of 2007 and then began sliding rapidly to a
low of $43 trillion (2007 dollars) in the first quarter of 2009 – a reduction of roughly 25
percent. Thereafter, household wealth began to climb slowly to a value of $48.6 trillion
(2007 dollars) in the second quarter of 2011. At that time, it was still 17% lower than its
2007 peak.
19 As indicated previously, the Boston area economy was robust before the recession – with
strong professional, scientific, and technical sectors, strong institutions of higher
education and health care, and a solid financial sector. It had a higher than average rate
of growth before and during the recession and in general a lower than average rate of
unemployment during most of the recession and recovery. Although its residents had a
greater proportion of their assets in real estate as compared with business or financial
equity, the proportion of their assets in real estate was below the national percentage and
the proportion in financial equity was above the national average. The recession affected
their net worth less than the national average for three reasons:
1. In the North East, including in the Boston area, real estate values, on average,
were higher than the national average in 2007 and did not fall as much as in
the nation; and this was more so among high valued property.
In the Boston metropolitan area owner-occupied units as a proportion of all
housing units was below the national proportion (57.1% vs. 59.0% in 2007).
However, according to the Census the median value of owner-occupied
housing in the Boston area was substantially above the national median
($448,737 vs. $191,471 in 2007) and remains 135% above the national
median at the current time. Moreover, the Case-Schiller Home Price Index
indicates that housing prices in the Boston area fell less from since 2007 to
2012 than the average of the national index based on the 20 largest
metropolitan areas (decline of 6.1% vs. 22.4%). This pattern is confirmed by
data from the Federal Housing Financing Agency.
2. Financial markets began to recover in the second quarter of 2009 while other
asset values continued to decline – the higher fraction of household assets in
the financial sector tended to offset the continued decline in real estate and the
slower decline in business equity.
3. In the Boston area, the ratio of household debt to household assets was lower
than the national average and of the average of other New England cities and
therefore net worth was less affected by the decline in asset valuation during
the recession.
Still, the recession and its slow recovery was the major financial event affecting
Bostonian’s wealth and wealth transfer since 2007. It reduced aggregate wealth transfer
by an average of 23 percent from what it would have been without the recession -although the values vary from 15% to 31%, depending on the scenario.
The Boston area wealth transfer analysis is based on the distribution of wealth in the base
year of 2007. To account for the impact of the recession we adjusted the wealth of each
household in the Boston CBSA microdata file based on historical valuations of
components of wealth during the recessionary years of 2008 through 2010.
20 In 2007 households in the Boston metropolitan area owned $1.351 trillion of household
wealth. In all growth scenarios, we adjusted its annual value to match the historical
record. In 2008, our adjustments reduced household wealth to $1.206 trillion; in 2009, to
$1.112 trillion; and in 2010 increased it to $1.166 trillion. Thereafter, we applied the
growth rate designated by the scenario in question. Through these adjustments, we
account for the impact of the recession on household wealth5.
We did not adjust wealth at the aggregate level. Instead, we adjusted it by revaluating the
asset structure of each household in our micro-data file and then adjusting the
composition of household portfolios to match control totals from Federal Reserve data.
For the years from 2007 through 2010, this yields annual distributions of wealth that vary
depending on the initial level and composition of wealth in 2007, annual asset valuations,
and compositional variations in portfolios.
It is important to emphasize that this reduction in wealth is accomplished for each
household based on the composition of its portfolio. Thus a household with its entire
portfolio in bonds would have had little if any reduction in wealth from 2007 through
2008. Those few Boston area households with all their assets in agricultural land actually
saw an increase in their assets during this time. In contrast, households with their assets
in housing and mutual funds generally suffered a substantial decline in their wealth
during this period.
Household debt was similarly adjusted on a household basis. Again we used historical
data and control totals from Federal Reserve and Bureau of Economic Analysis to adjust
household debt. It should be noted that in the first year of the recession many households
increased their credit card debt in response to losing income. Thereafter, households
shed debt through a variety of mechanisms, such as paying off credit cards or paying
down mortgages or buying less on credit. These adjustments were also made to each
household in the analysis.
Boston Metropolitan Area Findings
There are two types of findings in this study. The first finding depicts the distribution of
household wealth, its relationship to age, and how it was affected by the recession. These
issues are important because the distribution of wealth and its relationship to age affect
the amount and timing of wealth transfer. The recession reduced wealth of more than 90
percent of all households – in dollar terms more among wealthy households than among
households in the lower half of the wealth distribution; but in percentage terms more
among households in the lower half of the wealth distribution than among wealthy
households.
The second type of finding projects the level and distribution of wealth transfer and
charitable giving for the 20-year period from 2007 through 2026 and also for the 55-year
5 The
aggregate figures in this paragraph are based on annual values from the Federal Reserve; the
aggregate figures in the prior paragraph are quarterly figures from the Federal Reserve.
21 period from 2007 through 2061. We will see that the recession reduces the transfer by a
substantial amount in all scenarios. Lifetime transfers move a portion of the total wealth
transfer 15 to 20 years closer to current time. This is important because some charitable
transfers will take place sooner than they otherwise would. More than 60 percent of
wealth transfer is made by households that have $1 million or more at the time of the
transfer. The pattern is similar for charitable giving in that households with $1 million or
more at the time of the donation account for more than 50 percent of the annual
donations..
The first set of findings involves the distribution of household wealth.
I. The Boston Metropolitan Area and National Distribution of Wealth
The amount of wealth and its distribution are important because they are major
determining factors in the magnitude of national wealth transfer. The distribution of
wealth by age is equally important because it is the major factor determining the timing
of wealth transfer.
In 2007, the aggregate household wealth (net worth) of the 1,732 thousand Boston area
households amounted to $1.351 trillion (2007 constant dollars) as compared with $58
trillion for the 116 million households in the United States as a whole. The 1.5% of the
nation’s households in the Boston metropolitan area owned 2.3 percent of the nation’s
household wealth, as measured by household net worth. Net worth is the market value of
all assets owned by members of a household minus the values of all debt. On average
Bostonians owned $784 thousand per household as compared with $501 thousand per
household for the nation); for the Boston area the median net worth was $170 thousand as
compared with $114 thousand for the nation.
Based on changes in prices from a variety of professional sources (e.g., Case-Schiller and
the National Association of Realtors for housing values; the Wilshire 5000 for stock
valuations, Lehman Brothers bond indices now maintained by Barclays Bank of London)
and household portfolio compositional data from the Federal Reserve, the micro data file
was adjusted for the recession for 2008, 2009, and 2010, as has been presented in a
previous section of the report.
At the low point of the recession (2009), aggregate net worth for households in the
Boston CBSA amounted to $1.112 trillion (2007 dollars) with an average value of $645
thousand per household and a median of $120 thousand per household. From their 2007
values, the mean declined by 18%, the median by 29% - reflecting the fact that household
wealth at the lower end of the wealth distribution suffered proportionally more in the
recession than household wealth at the upper end.
By 2010, the economy was slowly starting to recover. Boston area’s aggregate wealth
grew to $1.166 trillion (2007 dollars) with an average value of $677 thousand per
household and a median of $132 thousand per household. The mean increased by 5% and
the median by 10% from their 2009 low values. However, they both remained
22 significantly lower than their high values in 2007. The mean was 14% and the median
22% below their 2007 values.
Tables 1 through 4 portray the distributions of household wealth in constant 2007 dollars
in the base year of 2007 (when household wealth was at its peak before the recession) as
well as in 2009 (when household wealth was at its nadir during the recession), and 2010
(when household wealth had started to recover but was still well below its peak level).
In Table 1 through Table 4, household wealth categories are constant across years but
households may fall into different wealth categories in successive years as compared with
previous years because their wealth is different in these successive years. Taken jointly,
these tables shows show the distribution of wealth shifted during the recession.
From Table 1, we see that in 2007 there were 239 thousand households with $1 million or
more in net worth in the Boston metropolitan area. They comprised 17% of all Boston
area households and owned 74% of Boston area aggregate household wealth. At the
lower end of the distribution there were 165 thousand households whose debt was at least
as large as their assets. In addition, there were another 751 thousand households whose
wealth was positive but less than $200 thousand. Combined, these groups comprised 53%
of the households and owned 4% of household wealth.
The recession shifted the entire distribution of wealth downward. In Table 2 through
Table 4, this is reflected mostly in the number and percentage of households in different
wealth levels for 2008, 2009, and 2010. The number and percentages of households in all
categories above $200 thousand declined from 2007 through 2009 and recovered only
slightly between 2009 and 2010. For example, the number of millionaires fell 24% from
239 thousand in 2007 to 182 thousand in 2009 and recovered 10% to 201 thousand in
2010.
Although the upper end of the wealth distribution shifted substantially lower as a result of
the recession, the lower end of the distribution was affected even more. Although there
were 24% fewer millionaires in 2009 as compared with 2007, there were also 94
thousand (57%) more households with negative or zero net worth during this same
timeframe.
Table 1 through Table 4 portray how the Boston metropolitan area distribution of wealth
was affected by the recession – what historically happened to the distribution. But if the
recession had not occurred, household wealth would have grown larger during this
period. The impact of the recession on household wealth is not just the decline but also
the foregone growth in wealth that would have occurred. Comparing Table 4 with Table
1 indicates that household wealth declined 13.7% in real terms between 2007 and 2010. If
it had grown at 2% household wealth would have increased by roughly 6.1%. The total
reduction in wealth and wealth transfer, including both the impact of the recession and
foregone growth amounts to a loss of 19.8% of baseline wealth if wealth had grown at
2%, 16.7% if wealth had grown at 1%, 23.0% if wealth had grown at 3%, and 26.2% if
wealth had grown at 4%.
23 II. The Distribution of Wealth by Age
The recession decreased the potential amount of Bostonian’s wealth that will be
transferred during the next several decades and even beyond. Given this reduction, the
timing of the transfer is affected mostly by the age distribution of wealth.
Table 5 through Table 8 presents the distribution of average wealth per household (2007
dollars) by age of head of household for 2007, 2008, 2009, and 2010. As classified in 10year age categories, the largest number of households (384 thousand in 2007) involves
heads whose age is between 40 and 49 years. In Table 5, we find that the average wealth
per household increases as age increases to a high value ($1,380,651 in 2007) at age 60 to
69 years and declines as age increases to age 70 but increases again to its highest level
($1,541,814 in 2007) at age 80 and older. It is important to note that young households
are concentrated at the low end of the wealth distribution and often have significant
amounts of installment loans on vehicles, student loans, and/or mortgage debt.
The recession lowered average wealth per household in all age brackets; however, in
percentage terms the impact of the recession was twice as much at the youngest end of
the age distribution in comparison to the oldest end. In 2009, for example, the average
wealth per household declined 45% among households whose head was under age 30 as
compared with a decline of 14% among households whose head was age 80 or older.
Table 9 through Table 12 presents the distribution of aggregate household wealth (2007
dollars) by age of head of household for 2007, 2008, 2009, and 2010. This data is the
most relevant for the timing of wealth transfer. It indicates that the largest amount of
aggregate wealth ($355 billion in 2007) occurs among households whose head is in the
50 to 59 year range. These tables reveal that a smaller proportion of Bostonian’s
aggregate wealth (15 percent vs. 20 percent) is held by households age 70 or older as
compared with similarly aged households in the nation. The average amount of wealth of
these households is more than 75 percent greater than those in the national distribution
(Table 5). Thus there will be a smaller proportion of older decedents in Boston relative
to the nation in the next 20 years but there transfer will be larger. Thereafter, the
disparity between Boston and the nation in terms of both proportions of decedents and
their wealth will grow larger.
The impact of the recession again reduced the aggregate households wealth in all age
categories but affected the younger households more than three times as much as the
older households. This asymmetry in impact is a silver lining to the recession as far as it
impacts wealth transfer. The older households will be transferring wealth near term and
their aggregate wealth has declined less than average. Most of the wealth of younger
households will not be transferred for decades. This delay in transfer allows younger
households to recoup much of their wealth that was disproportionately diminished by the
recession. They will have to increase their savings, consume less, invest more, work
harder or otherwise arrange their finances to grow to do so. In fact there is evidence of
higher levels of savings, paying down of debt, and slow growth of consumption since the
24 recession, according to personal income tabulations from the Bureau of Economic
Analysis.
III. Boston Metropolitan Area Estimates of Wealth Transfer and Charitable Giving
Scenarios
The WTMM was run under four growth scenarios (1%, 2%, 3%, and 4% secular growth).
The secular growth rates in all scenarios are activated in 2011. Between 2007 and 2011
the historical growth of wealth is used in each of the scenarios. The historical rates
reflect the recession and generally result in substantially less wealth transfer than had
wealth grown at the secular rates throughout the time period.
Within each growth scenario the model was run for two estate tax configurations – (1)
current law with return to 2001 provisions with $1 million exemption in 2013 and (2)
extension of 2012 provisions with $5 million exemption. Both estate tax congigurations
are assumed to hold from 2013 through 2061, that is, to the end of the period of the
analysis. The current law consists of the provisions of the Economic Growth and Tax
Relief Reconciliation Act of 2001 as subsequently amended by the Tax Relief,
Unemployment Insurance Reauthorization and Job Creation Act of 2010. In particular
the law sunsets at the end of 2012 and reverts to the estate tax provisions in effect in
2001, except that the exemption level is set at $1 million thereafter. The $5 million
exemption is based on the same provisions in effect in 2012 and keeps the $5 million
exemption and other provisions at their 2012 levels thereafter.
In total, there were eight scenarios: 4 growth models x 2 tax models=8 scenarios.
Summary of Results The summary of findings for all scenarios are presented in Table 13 for the 20-year time
frame from 2007 through 2026 and in Table 14 for the 55-year period from 2007 through
2061. Each column in these tables presents estimates for the scenario listed at the top of
the column. The scenarios are defined in terms of both a rate of growth and an estate tax
policy that is identified by its exemption level (either $1 million after 2012 for current
law with its sunset provision or $5 million after 2012 if the provisions in effect in 2012
are extended).
Tables 13 and 14 are formatted identically.
25 The first row in the tables contains an estimate of the magnitude of wealth transfer for the
period in question if there had been no recession. The second row contains our estimate
of wealth transfer given that the recession occurred.
The next three rows break the total transfer into three components: accelerated lifetime
giving (i.e. transfers of assets) to charitable causes; other lifetime transfers of assets
usually to trusts, limited partnerships, or directly to heirs; and assets of final estates at
death. It should be noted that other lifetime transfers of assets might also involve some
transfers to charitable under certain contingencies.
The next five rows list estimates for the five distributional components of the value of
final estates: Massachusetts estate taxes, federal estate taxes, bequests to charitable
causes, bequests to heirs, and estate closing costs.
The next five rows define the potential funds allocated to charity during the period in
question for each scenario and is demarcated by the sub-heading entitled, “Potential for
Charity.”
The first row under this heading is an aggregate household giving along trend for the
scenario in question. The second row lists additional accelerated giving estimated from
the model as part of wealth transfer. The next row is the sum of the prior two and is
labeled, “Total Lifetime Giving.”
The fourth row is the estimate of charitable bequests for the given scenario. The final
row is the sum of Total Lifetime Giving and Charitable Bequests and is labeled,
“Potential Total to Charity.”
Wealth Transfer for 20-Year Time Frame
Table 13 summarizes the national wealth transfer estimates as well as the potential giving
to charity for all scenarios in the 20-year period from 2007 through 2026, inclusive. In
the upper left corner, it indicates that in the 20-year period there will be 359,578 final
estates generated by the 2007 population of households in the Boston CBSA.
The amount of wealth transfer, its distribution, and the potential charitable giving
depends, among other factors, on the secular rate of growth and on the provisions of the
estate tax laws. Of growth rates and tax provisions, the growth rate has the largest impact
on these estimates. The estate tax provisions mainly affect distribution of final estates
among taxes, charitable bequests, bequests to heirs, and estate closing costs. Through
charitable bequests, the estate tax laws also affect the total potential for charity during the
period in question.
Table 13 indicates that from 2007 through 2026 there will be 359,578 final estates.
Between $407 billion and $603 billion of household wealth will be transferred during this
period, depending on the scenario. Between $41 billion and $88 billion in assets will be
transferred through acclerated giving and other lifetime transfers during the lifetime of
26 Boston area householders. The remaining $366 billion to $515 billion will be transferred
through the 359,578 final estates of deceased householders in the Boston metropolitan
area.
The value of final estates will be distributed to estates taxes, charitable bequests, bequests
to heirs, and estate closing costs. Depending on the scenario, Massachusetts estate taxes
will vary from $21 billion to $32 billion; federal estate taxes will vary from $41 billion to
$115 billion; charitable bequests will vary from $82 billion to $132 billion; bequests to
heirs, from $183 billion to $283 billion; and estate closing costs, from $7 billion to $10
billion.
The total potential for charity during this 20-year span will be a considerable $168 billion
to $240 billion, again depending on the scenario. In all scenarios, however, roughly half
the total (45% to 51%) will come from lifetime giving and the remainder from charitable
bequests.
The rest of this section presents the 20-year findings in more detail than above. There are
parallel sections for each growth scenario.
1% Growth 2007-2026
In the 1% growth scenario with sunset provisions taking place after 2012 and the $1
million exemption reinstated, there will be $407.19 billion of total wealth transfer from
2007 through 2026. There would have been $459.84 billion had there been no recession.
The $407.19 billion is divided among accelerated lifetime giving ($7.14 billion); other
lifetime transfers ($33.98 billion), and the value of final estates ($366.07 billion). (Recall
a final estate is the value of the estate when the surviving spouse dies – that is, when
there is no surviving spouse).
The value of the final estate does not all go to heirs. It will be distributed to estate taxes:
($21.16 billion in Massachusetts estate taxes and $73.10 billion in federal estate taxes),
charitable bequests ($82.24 billion), bequests to heirs ($182.55 billion), and estate closing
costs ($7.03 billion).
The bottom rows of Table 13 list the potential charitable giving for the period from 2007
through 2026, inclusive. We performed an independent estimate of baseline lifetime
charitable giving using a trend analysis. For the 1% growth scenario the estimate was
$78.57 billion. To this we add the $7.14 billion of accelerated giving for a total lifetime
giving amount of $85.72 billion. We then add the charitable bequests through estates to
the charitable lifetime giving to obtain a potential total to charity of $167.95 billion in
this 20-year 1% growth scenario with $1 million estate tax exemption level after 2012.
Within the 1% growth scenario, the main difference in findings between the $1 million
exemption scenario and the $5 million exemption scenario lies in the amount of estate
taxes paid upon death and the distribution of the value of final estates to charitable
causes, to heirs, and to estate closing costs. Table 13 indicates that within the 1%
27 scenario, maintaining the estate tax provisons and estate tax exemption at $5 million after
2012 will result in negligible changes in tax revenue for Massachusetts, $32.26 billion
less tax revenue for the federal government, $10.84 billion more charitable bequests, and
$21.88 billion more bequests to heirs and small changes in estate closing costs during the
period from 2007 through 2026. It also results in $10.91 billion more in the potential
amount allocated to charity during the period.
2% Growth 2007-2026
In the 2% growth scenario with sunset provisions taking place after 2012 and the $1
million exemption reinstated, there will be $461.51 billion of total wealth transfer from
2007 through 2026. There would have been $546.92 billion had there been no recession.
The $461.51 billion is divided among accelerated lifetime giving ($8.94 billion); other
lifetime transfers ($42.45 billion), and the value of final estates ($410.12 billion).
The value of the final estate will be distributed to Massachusetts estate taxes ($23.76
billion), federal estate taxes ($84.02 billion), charitable bequests ($89.99 billion),
bequests to heirs ($204.45 billion), and estate closing costs ($7.91 billion).
The bottom rows of Table 13 again list the potential charitable giving for the period from
2007 through 2026, inclusive. For the 2% growth scenario the independent estimate of
baseline lifetime charitable giving was $83.38 billion. To this we add the $8.94 billion of
accelerated giving for a total lifetime giving amount of $92.32 billion. We then add the
charitable bequests through estates to the charitable lifetime giving to obtain a potential
total to charity of $182.31 billion in this 20-year 2% growth scenario with $1 million
estate tax exemption level after 2012.
Within the 2% growth scenario, the main difference in findings between the $1 million
exemption scenario and the $5 million exemption scenario lies in the amount of estate
taxes paid upon death and the distribution of the value of final estates to charitable
causes, to heirs, and to estate closing costs. Table 13 indicates that within the 2%
scenario, maintaining the estate tax provisions and exemption at $5 million after 2012
will result in $0.05 billion more tax revenue for Massachusetts, $39.44 billion less
revenue for the federal government, $12.83 billion more charitable bequests, $29.24
billion more bequests to heirs and $.15 billion more in estate closing costs during the
period from 2007 through 2026. It also results in $12.94 billion more in the potential
amount allocated to charity during the period.
3% Growth 2007-2026
In the 3% growth scenario with sunset provisions taking place after 2012 and the $1
million exemption reinstated, there will be $527.91 billion of total wealth transfer from
2007 through 2026. There would have been $663.25 billion had there been no recession.
28 The $527.91 billion is divided among accelerated lifetime giving ($11.23 billion); other
lifetime transfers ($56.53 billion), and the value of final estates ($460.15 billion).
The value of the final estate will be distributed to Massachusetts estate taxes ($27.39
billion), federal estate taxes ($98.29 billion), charitable bequests ($100.55 billion),
bequests to heirs ($225.12 billion), and estate closing costs ($8.80 billion).
The bottom rows of Table 13 again list the potential charitable giving for the period from
2007 through 2026, inclusive. For the 3% growth scenario the independent estimate of
baseline lifetime charitable giving was $88.62 billion. To this we add the $11.23 billion
of accelerated giving for a total lifetime giving amount of $99.85 billion. We then add
the charitable bequests through estates to the charitable lifetime giving to obtain a
potential total to charity of $200.40 billion in this 20-year 3% growth scenario with $1
million estate tax exemption level after 2012.
Within the 3% growth scenario, the main difference in findings between the $1 million
exemption scenario and the $5 million exemption scenario lies in the amount of estate
taxes paid upon death and the distribution of the value of final estates to charitable
causes, to heirs, and to estate closing costs. Table 13 indicates that within the 3%
scenario, maintaining the estate tax provisions and exemption at $5 million after 2012
will result in a negligible change in tax revenue for Massachusetts, $47.79 billion less tax
revenue for the federal government, $15.42 billion more charitable bequests, $33.23
billion more bequests to heirs and negligible changes in estate closing costs during the
period from 2007 through 2026. It also results in $15.54 billion more in the potential
amount allocated to charity during the period.
4% Growth 2007-2026
In the 4% growth scenario with sunset provisions taking place after 2012 and the $1
million exemption reinstated, there will be $600.13 billion of total wealth transfer from
2007 through 2026. There would have been $801.02 billion had there been no recession.
The $600.13 billion is divided among accelerated lifetime giving ($14.04 billion); other
lifetime transfers ($72.68 billion), and the value of final estates ($513.40 billion).
The value of the final estate will be distributed to Massachusetts estate taxes ($31.78
billion), federal estate taxes ($114.89 billion), charitable bequests ($6113.37 billion),
bequests to heirs ($243.70 billion), and estate closing costs ($9.66 billion).
The bottom rows of Table 4 again list the potential charitable giving for the period from
2007 through 2026, inclusive. For the 4% growth scenario the independent estimate of
baseline lifetime charitable giving was $94.34 billion. To this we add the $14.04 billion
of accelerated giving for a total lifetime giving amount of $108.39 billion. We then add
the charitable bequests through estates to the charitable lifetime giving to obtain a
potential total to charity of $221.76 billion in this 20-year 4% growth scenario with $1
million estate tax exemption level after 2012.
29 Within the 4% growth scenario, the main difference in findings between the $1 million
exemption scenario and the $5 million exemption scenario lies in the amount of estate
taxes paid upon death and the distribution of the value of final estates to charitable
causes, to heirs, and to estate closing costs. Table 13 indicates that within the 4%
scenario, maintaining the estate tax provisions and exemption at $5 million after 2012
will result in negligible changes to Massachusetts tax revenue, $15.14 billion less federal
tax revenue, $18.51 billion more charitable bequests, $39.46 billion more bequests to
heirs and negligible changes in estate closing costs during the period from 2007 through
2026. It also results in $2.15 billion more in the potential amount allocated to charity
during the period.
Wealth Transfer for 55-Year Time Frame
Table 14 summarizes our new national wealth transfer estimates as well as the potential
giving to charity for all scenarios in the 55-year period from 2007 through 2061,
inclusive. The format of the table is the same as the format of Table 13. In the upper left
corner it indicates that in the 55-year period there will be 1,421,598 final estates
generated by the 2007 population of households in the Boston CBSA.
The amount of wealth transfer, its distribution, and the potential charitable giving
depends, among other factors, on the secular rate of growth and on the provisions of the
estate tax laws. The growth rate has a larger impact on these estimates than do provisions
of the estate taxes. The estate tax provisions mainly affect distribution of final estates
among taxes, charitable bequests, bequests to heirs, and estate closing costs. Through
charitable bequests, the estate tax laws also affect the total potential for charity during the
period in question.
The magnitude of the wealth transfer and of charitable giving will be more than
proportionately larger in the 55-year period from 2007 through 2061 than in the first 20
years of this period due to two factors: (1) the magic of compound rates of growth will
have more time to operate, and (2) inheritors will also grow their wealth and some of
them will also transfer their wealth during this period.
Table 14 indicates that from 2007 through 2061 there will be 1,421,598 final estates in
Massachusetts. Between $949.77 billion and $3.994 trillion of household wealth will be
transferred during this period, depending on the growth scenario and estate tax regimen.
Between $122.26 billion and $673.70 billion in assets will be transferred during the
lifetime of the householders. The remaining $827.50 billion to $3.320 trillion will be
transferred through the final estates of deceased householders.
The value of final estates will be divided among estate taxes, charitable bequests,
bequests to heirs, and estate closing costs. Massachusetts estate tax liabilities vary from
$36.09 billion to $209.72 billion; federal estate taxes from $50.50 to $933.66 billion;
charitable bequests vary from $121.62 billion to $870.18 billion; bequests to heirs, from
$486.59 billion to $1.910 trillion; and estate closing costs, from $17.53 billion to $60.36
billion.
30 The total potential for charity during this 55-year span will be a considerable $418.89
billion to $1.629 trillion, again depending on the scenario. In all scenarios, however,
nearly half or more of the total (47% to 71%) will come from lifetime giving rather than
charitable bequests.
The remainder of this section presents the 55-year findings in more detail than the
summary above. There are parallel sections for each growth scenario.
1% Growth 2007-2061
In the 1% growth scenario with sunset provisions taking place after 2012 and the $1
million exemption reinstated, there will be $949.77 billion of total wealth transfer from
2007 through 2061. There would have been $1.115 trillion had there been no recession.
The $949.77 billion is divided among accelerated lifetime giving ($24.47 billion); other
lifetime transfers ($97.79 billion), and the value of final estates ($827.50 billion).
The value of the final estate does not all go to heirs. It will be distributed to
Massachusetts estate taxes ($36.09 billion), federal estate taxes ($165.66 billion),
charitable bequests ($121.62 billion), bequests to heirs ($486.59 billion), and estate
closing costs ($17.53 billion).
The bottom rows of Table 14 list the potential charitable giving for the period from 2007
through 2061, inclusive. We performed an independent estimate of baseline lifetime
charitable giving using a trend analysis. For the 1% growth scenario the estimate was
$272.80 billion. To this we add the $24.47 billion of accelerated giving for a total
lifetime giving amount of $297.27 billion. We then add the charitable bequests through
estates to the charitable lifetime giving to obtain a potential total to charity of $418.89
billion in this 55-year 1% growth scenario with $1 million estate tax exemption level
after 2012.
Within the 1% growth scenario, the main difference in findings between the $1 million
exemption scenario and the $5 million exemption scenario lies in the amount of estate
taxes paid upon death and the distribution of the value of final estates to charitable
causes, to heirs, and to estate closing costs. Table 14 indicates that within the 1%
scenario, maintaining the estate tax exemption at $5 million after 2012 will result in $.79
billion more tax liability for Massachusetts decedents, $115.16 billion less tax revenue
for the federal government, $26.91 billion more charitable bequests, and $102.18 billion
more bequests to heirs and $.43 billion more in estate closing costs during the period
from 2007 through 2061. It also results in $28.26 billion more in the potential amount
allocated to charity during the period.
2% Growth 2007-2061
In the 2% growth scenario with sunset provisions taking place after 2012 and the $1
million exemption reinstated, there will be $1.467 trillion of total wealth transfer from
31 2007 through 2061. There would have been $1.808 trillion had there been no recession.
The $1.467 trillion is divided among accelerated lifetime giving ($46.15 billion); other
lifetime transfers ($179.35 billion), and the value of final estates ($1.258 trillion).
The value of the final estate will be distributed to Massachusetts estate tax liabilities
($58.91 billion), federal estate taxes ($288.90 billion), charitable bequests ($175.18
billion), bequests to heirs ($709.35 billion), and estate closing costs ($26.13 billion).
The bottom rows of Table 14 again list the potential charitable giving for the period from
2007 through 2061, inclusive. For the 2% growth scenario the independent estimate of
baseline lifetime charitable giving was $353.58 billion. To this we add the $43.57 billion
of accelerated giving for a total lifetime giving amount of $397.15 billion. We then add
the charitable bequests through estates to the charitable lifetime giving to obtain a
potential total to charity of $572.33 billion in this 55-year 2% growth scenario with $1
million estate tax exemption level after 2012.
Within the 2% growth scenario, the main difference in findings between the $1 million
exemption scenario and the $5 million exemption scenario lies in the amount of estate
taxes paid upon death and the distribution of the value of final estates to charitable
causes, to heirs, and to estate closing costs. Table 14 indicates that within the 2%
scenario, maintaining the estate tax provisions and $5 million exemption after 2012 will
result in $2.03 billion more tax liability for Massachusetts decedents, $116.75 billion less
tax revenue for the federal government, $52.40 billion more charitable bequests, $193.43
billion more bequests to heirs and negligible changes in estate closing costs during the
period from 2007 through 2061. It also results in $54.97 billion more in the potential
amount allocated to charity during the period.
3% Growth 2007-2061
In the 3% growth scenario with sunset provisions taking place after 2012 and the $1
million exemption reinstated, there will be $2.349 trillion of total wealth transfer from
2007 through 2061. There would have been $3.143 trillion had there been no recession.
The $2.239 trillion is divided among accelerated lifetime giving ($74.20 billion); other
lifetime transfers ($290.92 billion), and the value of final estates ($1.983 trillion).
The value of the final estate will be distributed to Massachusetts estate tax liabilities
($106.37 billion), federal estate taxes ($523.85 billion), charitable bequests ($321.99
billion), bequests to heirs ($992.59 trillion), and estate closing costs ($38.67 billion).
The bottom rows of Table 14 again list the potential charitable giving for the period from
2007 through 2061, inclusive. For the 3% growth scenario the independent estimate of
baseline lifetime charitable giving was $466.89 billion. To this we add the $74.20 billion
of accelerated giving for a total lifetime giving amount of $541.09 billion. We then add
the charitable bequests through estates to the charitable lifetime giving to obtain a
potential total to charity of $863.07 billion in this 55-year 3% growth scenario with $1
million estate tax exemption level after 2012.
32 Within the 3% growth scenario, the main difference in findings between the $1 million
exemption scenario and the $5 million exemption scenario lies in the amount of estate
taxes paid upon death and the distribution of the value of final estates to charitable
causes, to heirs, and to estate closing costs. Table 14 indicates that within the 3%
scenario, maintaining the estate tax provisions and exemption at $5 million after 2012
will result in $4.69 billion more tax liability for Massachusetts decedents, $393.19 billion
less tax revenue for the federal government, $119.27 billion more charitable bequests,
and $332.14 billion more bequests to heirs and $1.20 billion more in estate closing costs
during the period from 2007 through 2061. It also results in $124.15 billion more in the
potential amount allocated to charity during the period.
4% Growth 2007-2061
In the 4% growth scenario with sunset provisions taking place after 2012 and the $1
million exemption reinstated, there will be $3.826 trillion of total wealth transfer from
2007 through 2061. There would have been $5.560 trillion had there been no recession.
The $3.826 trillion is divided among accelerated lifetime giving ($124.13 billion); other
lifetime transfers ($495.25billion), and the value of final estates ($3.206 billion).
The value of the final estate will be distributed to Massachusetts estate tax liabilities
($200.39 billion), federal estate taxes ($933.66 billion), charitable bequests ($629.20
billion), bequests to heirs ($31.385 trillion), and estate closing costs ($58.37 billion).
The bottom rows of Table 14 again list the potential charitable giving for the period from
2007 through 2061, inclusive. For the 4% growth scenario the independent estimate of
baseline lifetime charitable giving was $626.99 billion. To this we add the $124.13
billion of accelerated giving for a total lifetime giving amount of $751.12 billion. We
then add the charitable bequests through estates to the charitable lifetime giving to obtain
a potential total to charity of $1.380 trillion in this 55-year 4% growth scenario with $1
million estate tax exemption level after 2012.
Within the 4% growth scenario, the main difference in findings between the $1 million
exemption scenario and the $5 million exemption scenario lies in the amount of estate
taxes paid upon death and the distribution of the value of final estates to charitable
causes, to heirs, and to estate closing costs. Table 14 indicates that within the 4%
scenario, maintaining the estate tax provisions and exemption at $5 million after 2012
will result in $9.33 billion more tax liabilities for Massachusetts decedents, $663.88
billion less tax revenue for the federal government, $240.98 billion more charitable
bequests, and $525.26 billion more bequests to heirs and $1.99 billion more estate closing
costs during the period from 2007 through 2061. It also results in $248.89 billion more in
the potential amount allocated to charity during the period.
Commentary on Wealth Transfer Findings
In all the scenarios there are some general points that are worth comment:
33 1. Massachusetts’ wealth transfer would have been substantially greater had there
been no recession. The recession led to negative growth in 2008 and again in
2009 due primarily to falling prices for equities and housing. In 2010
Massachusetts’ aggregate household wealth remained 14% below its 2007 level
although in aggregate Massachusetts’ households experienced positive annual
growth for the year.
In addition to a decline in wealth during the recession, wealth transfer suffered
from the opportunity costs of not growing at the secular rates specified in each
scenario. In other words if the recession had not occurred, not only would
household wealth have avoided a downturn but it would have grown at a positive
rate. The sum of these two components contribute to the difference between our
estimates of wealth transfer had there been no recession and our estimates that are
based on the realities of the recession.
2. The difference between our estimates of wealth transfer had there been no
recession and those accounting for the recession increase both in the magnitude of
the difference and in the percentage of difference with the secular rate of growth.
3. Within each secular growth rate there is a small positive impact in our estimates
of wealth transfer between the current law with sunset clause and $1 million
estate tax exemption and the current 2012 rates and provisions with $5 million
estate tax exemption scenarios. This small impact is due to the fact that the higher
exemption level leaves more wealth in the hands of heirs whose wealth, on
average, also grows. Some of these heirs also transfer their wealth during the
time frame of the scenario.
4. The federal estate tax liability will be substantial under current law (with sunset)
but is 70% to 75% less under current rates with $5 million exemption. The
federal estate tax liability exceeds the Massachusetts estate tax liability both in the
near (20-year) term and in the long (55-year) term regardless of the growth rate of
the scenario and regardless of the tax regime.
5. Within each secular growth scenario, the major difference between the current
law ($1 million exemption) and the current rate ($5 million exemption) lies in the
distribution of final estates to estate taxes, charitable bequests, and heirs. The sun
setting of the estate tax provisions leads to larger amounts of estate tax liabilities
and smaller amounts to charitable bequests and bequests to heirs in comparison
with the $5 million estate tax exemption in place in 2011 These results are
somewhat attenuated from what they would have been had there not been a
Massachusetts estate tax.
6. The major impact on charitable giving is due to the different growth rates in
wealth – which affect the overall capacity of Massachusetts households,
especially wealthy households, to contribute to charity.
34 7. Within each 55 year growth scenario, however, differences in total charitable
giving are due primarily to the larger aggregate charitable bequests (about 22% to
38% larger) under the $5 million exemption as compared with the $1 million
exemption after 2012.
8. In all scenarios, wealth transfer will be concentrated among households at the
upper end of the wealth distribution. The vast majority of the transfer will be
made by the 15% to 20% of wealthy households that will have at least $1 million
in net worth at the time of the transfer. These households will transfer between
81% and 94% of the total wealth transfer. For example, in the 2% growth
scenario, 16% of the affluent households will transfer 85% of the total wealth
transfer. Some of the transfer will take place during the lifetime of the donors; the
remainder will be transferred via their estates.
9. During the same time frame (2007 through 2061) these households will donate or
bequeath $289 billion to $1.295 trillion to charitable causes, depending on the rate
of growth in their wealth. Except for the 4% growth with current tax provisions
and the $5 million exemption, most of the charitable giving will take place during
the donor’s lifetime. However, both the amount and the proportion of the total
potential giving bequeathed to charity through estates increase as the growth rate
increases.
Impact of Estate Taxes on Wealth Transfer
In each growth scenario in Table 13 and Table 14, the estimates of wealth transfer are
somewhat greater in the current provisions ($5 million exemption) scenario than in the
current law ($1 million exemption) scenario, even though they share the same growth
rate. This reflects the fact that heirs receive larger bequests in the $5 million exemption
than in the $1 million exemption tax code – that is, less goes to the government. The
larger amount of inheritance will contribute to the future wealth of the heirs. Some (a
relatively small number) of these heirs will begin to transfer wealth in the timeframe of
the study and this additional transfer results in higher estimates for the $5 million
exemption relative to the $1 million exemption in each growth scenario.
Although there is an effect of estate taxes on the magnitude of wealth transfer the major
impact of the taxes is on the distribution of the value of final estates among taxes,
charitable bequests, bequests to heirs, and estate closing fees.
Boston Metropolitan Area Details of Distribution of Final Estates
In prior sections of this report we presented a summary of findings about wealth transfer
and its components. One of the components is final estates. These estates are also
distributed by the value of estate taxes, charitable bequests, bequests to heirs, and closing
costs of the estate. They are also distributed by the net worth of the estate, itself.
35 In this section we present the details of the distribution of final estates by the original net
worth of the estate. The distribution, of course, depends on the secular rate of growth as
well as the tax policy. All the tables demonstrate some common patterns and some
idiosyncratic patterns. We will discuss some of the common patterns next, and then
present the eight detailed tables. For clarification, the reader should note that in the
following “estate” means “final estate”.
The first common pattern: the transfer of wealth by estates is top heavy. A relatively
small proportion of estates with high net worth accounts for the majority of the aggregate
wealth transferred through estates. The aggregate transferred and the percentages of
estates involved vary by growth rate and tax policy, but the pattern remains top heavy.
This means that most inheritors will not receive a large inheritance during their lifetime
from a secret treasure trove of their parents or grandparents.
Second, the value of the estates is not all transferred to heirs or to charity – the value is
distributed to estate taxes, charitable bequests, heirs, and estate closing costs (mostly
legal and burial costs). The multiplicity of beneficiaries of estates implies that wealth
transfer diffuses the decedents’ wealth through a larger network than just their offspring.
Like the transmission of electrical energy, some wealth is lost in the process of
propagation to heirs.
Third, empirically, the percentage of the estate that is allocated to charity increases as the
net worth of the estate increases; the percentage is above 30% for estates of $20 million
or more. A grossly simplified explanation involves the fact that wealth holders with
enormous wealth will already have transferred some of their wealth during their lifetime,
but there will still be more than enough remaining in their estates to allocate comfortable
amounts to their heirs with a surplus left for charitable allocations. Many of the
wealthiest people have a strong commitment to their philanthropic endeavors, and their
allocations to philanthropy may have higher precedence in the division of their estate.
The point is that the distribution of the value of charitable bequests is even more top
heavy than the value of the final estates.
Detailed Distribution of Final Estates – 1% Secular Growth
Table 15 presents the detailed results of the sluggish (1%) secular growth scenario with
$1 million in estate tax exemption for the Boston metropolitan area. The total transfer
and its distribution are located in the total column, which is the rightmost column in each
panel.
Table 15 Panel 1 presents the estimates for the 20-year period from 2007 through 2026.
Table 15 Panel 2 presents the corresponding estimates for the entire 55-year period from
2007 through 2061. Within each panel the columns define the value of the final estate,
which is categorized by the net worth of the household when the final householder dies.
The rows of the table define the number of final estates, the value in terms of net worth of
final estates, estate fees, federal and state estate taxes, bequests to charity, and bequests to
36 heirs.
In the upper right corner of each cell there is a small percentage that is distributed across
the estate net worth categories. They add to 100 percent across the columns. In any
given column the percentage indicates the percentage of the row total that is due to final
estates in the given net worth category specified by the column.
Similarly, at the bottom of each cell there is a percentage that is distributed across the
recipient categories. They add to 100 percent down each column. In any given row, they
indicate the percentage of the column total that is allocated to the recipient category
specified by the row.
For the Boston area we estimate that 1,421,598 final estates will occur during the 55-year
period from 2007 through 2061. These final estates will be valued at $827.50 billion
(2007 dollars) at the time of death if national wealth grows at an average real annual
secular rate of 1% and there is $1 million exemption in estate taxes. The model projects
$17.53 billion will be distributed to estate fees, $36.09 billion to Massachusetts estate tax
liabilities, $165.66 to federal estate taxes, $121.62 billion to charitable bequests, and
$586.49 billion to heirs. The $121.62 billion of potential charitable bequests constitutes
15% of the $827.50 billion value of final estates.
More than half the potential charitable bequests (73%) are generated by the 0.33% of
final estates with value of $20 million or more. On average, estates of $20 million or
more give the largest fraction (34%) of their value to charity in this growth scenario as
compared with estates of lesser value.
The transfer of wealth is concentrated among wealthy final estates. Most (79%) of the
$827.50 billion of value of final estates in the 1% growth scenario occurs among the 10%
of final estates with value of $1 million or more. These estates pay 69% of the aggregate
estate fees, 100.0% of the aggregate Massachusetts estate tax liabilities, 100% of the
aggregate federal estate taxes, 92% of the aggregate charitable bequests, but only 66% of
the aggregate bequests to heirs.
Panel 1 of Table 15 indicates that 44% ($366.07 billion out of the 55 year total $827.50
billion) value of final estates will occur before 2027. During the first 20 years from 2007
to 2026, 359,578 final estates will occur. These 359,578 final estates amount to 25% of
the number of final estates generated during the entire 55-year period of the simulation.
The aggregate value of these estates is $366.07 billion (44% of the aggregate value
during the entire 55 year period) with potential aggregate charitable bequests of $82.24
billion (68% of the aggregate amount during the entire period). More than half of the
value of final estates but only a third of charitable bequests will occur later than 2026 in
this scenario.
Table 16 presents the detailed results of the sluggish (1%) secular growth scenario with
$5 million in estate tax exemption for the nation. The total transfer and its distribution
are located in the total column, which is the rightmost column in each panel. The major
37 difference between Table 15 and Table 16 is in the distribution of the value of final
estates to estate taxes, charitable bequests, bequests to heirs, and estate closing costs and
fees. When the estate tax exemption is $5 million, it generates slightly more ($.79
billion) Massachusetts estate tax liability among Boston CBSA decedents, substantially
less ($115.16 billion) revenue for the federal government, and more for charitable
bequests ($26.90 billion) and heirs ($102.17 billion) during the 55-year period. In this
same time frame, the value of final estates is also $315.13 billion more in the current
provisions with $5 million as compared with the current law with $1 million tax
exemption.
Change in Millionaire Households
In 2007 there were 238,887 households in the Boston metropolitan area with at least $1
million in net worth. By the end of March, 2009 this number had dropped to 182,064
households, and by the end of 2010 it had increased somewhat to 200,896 households.
During the full 55 years of the 1% growth scenario, approximately 83,369 households
will lose their millionaire status for a total of 155,518 households with net worth of at
least a million dollars.
Moderately Low (2%) Secular Growth Scenario
Table 17 presents the detailed national results of the middle (2%) secular growth scenario
with $1 million in estate tax exemption. It is formatted the same as Table 15. As in
Table 15 the total transfer through final estates and its distribution are located in the total
column, which is the rightmost column in each panel.
Panel 1 presents the estimates for the 20-year period from 2007 through 2026. Panel 2
presents the corresponding estimates for the entire 55-year period from 2007 through
2061. Within each panel the columns define the value of the final estate, which is
categorized by the net worth of the household when the final householder dies. The rows
of the table define the number of final estates, the value in terms of net worth of final
estates, estate fees, federal and state estate taxes, bequests to charity, and bequests to
heirs.
For the Boston CBSA we estimate that 1,421,598 final estates will occur during the 55year period from 2007 through 2061. These final estates will be valued at $1,258.46
billion (2007 dollars) at the time of death if wealth grows nationally at an average real
annual secular rate of 2% and there is $1 million exemption in estate taxes after 2012.
The model projects $26.13 billion will be distributed to estate fees, $58.92 billion in
Massachusetts estate tax liabilities, $288.90 billion to federal estate taxes, $175.18 billion
to charitable bequests, and $709.35 billion to heirs. The $175.18 billion of potential
charitable bequests constitutes 14% of the $1,258.46 billion value of final estates – about
45% more than the comparable figure for the 1% growth scenario.
About two-thirds of the potential charitable bequests (66%) are generated by the 0.45%
38 of final estates with value of $20 million or more. This proportion (66%) is large for two
reasons: (1) final estates valued at $20 million or more account for 28% of the $1,258.46
billion in total value of final estates in the Boston metropolitan area; and (2) on average,
estates of $20 million or more give the largest fraction (33%) of their value to charity as
compared with estates of lesser value.
For the Boston CBSA the transfer of wealth is concentrated among wealthy final estates.
Most (82%) of the $1,258.46 billion value of final estates in the 2% growth scenario
occurs among the 15% of final estates with value of $1 million or more. These estates
pay 74% of the aggregate estate fees, 100% of federal estate taxes, 100.0% of the
Massachusetts aggregate estate taxes, 93% of the aggregate charitable bequests, but only
71% of the aggregate bequests to heirs.
Panel 1 of Table 17 indicates that 33% ($410.12 billion out of the 55 year total $1,258.46
billion) of value of final estates in the Boston area will occur before 2027. During the
first 20 years from 2007 to 2026, 359,578 final estates will occur. These 359,578 final
estates amount to 25% of the number of final estates generated during the entire 55-year
period of the simulation. The aggregate value of these estates is $410.12billion (33% of
the aggregate value during the entire 55 year period) with potential aggregate charitable
bequests of $389.99 billion (51% of the aggregate amount during the entire period).
About two-thirds of the value of final estates and nearly half the charitable bequests for
the Boston metropolitan area will occur later than 2026 in the 2% growth scenario.
Table 18 presents the detailed national results of the moderately low (2%) secular growth
scenario with $5 million in estate tax exemption after 2012. The total transfer and its
distribution are located in the total column, which is the rightmost column in each panel.
The major difference between Table 17 and Table 18 is in the distribution of the value of
final estates to estate taxes, charitable bequests, bequests to heirs, and estate closing costs
and fees. When the estate tax exemption is $5 million, it generates $2.03 billion more
Massachusetts estate tax liability, substantially less ($216.75 billion) revenue for the
federal government, and more for bequests to charity ($52.40 billion) and heirs ($193.43
billion) during the 55-year period. In this same time frame, the value of final estates is
also $31.83 billion more in the $5 million as compared with the $1 million tax
exemption.
Change in Millionaire Households
In 2007 there were 238,887 households in the Boston metropolitan area with at least $1
million in net worth. By the end of March, 2009 this number had dropped to 182,064
households, and by the end of 2010 it had increased somewhat to 200,896 households.
During the 55 years of the 2% growth scenario, there will be a net gain of 1,419
households with millionaire status for a total of 240,306 households with net worth of at
least a million dollars.
39 Middle (3%) Secular Growth Scenario
Table 19 presents the Boston metropolitan area detailed results of the middle (3%)
secular growth scenario with $1 million in estate tax exemption. It is formatted the same
as Table 15. As in Table 15 the total transfer and its distribution are located in the total
column, which is the rightmost column in each panel.
In the middle growth scenario for the Boston area we again estimate that 1,241,598 final
estates will occur among the 2007 population of households during the 55-year period
from 2007 through 2061. These final estates will be valued at $1,983.46 billion at the
time of death if wealth grows nationally at an average annual secular rate of 3% and there
is $1 million exemption in estate taxes after 2012. The model projects that $38.67 billion
will be distributed to estate fees, $106.38 billion to Massachusetts estate tax liabilities,
$523.85 billion to federal estate taxes, $321.99 billion to charitable bequests, and
$992.59 billion to heirs. The $321.99 billion of potential charitable bequests constitutes
17% of the $1,983.46 billion value of final estates – an additional 84% as compared with
the 2% growth scenario.
Once again, most of the potential charitable bequests (72%) are generated by the 1% of
final estates valued at $20 million or more. This proportion (72%) is large for two
reasons: (1) final estates with values of $20 million or more account for 36% of the
$1,938.46 billion in the value of final estates; and (2) on average, estates of $20 million
or more give the largest fraction (33%) of their value to charity as compared with estates
of lesser value.
The Boston area transfer of wealth is concentrated among wealthy final estates. Most
(87%) of the 1,983.46 billion of wealth transfer in the middle (3%) growth scenario
occurs among the 19% of final estates with value of $1 million or more. These estates
pay 80% of the aggregate estate fees, 100% of the Massachusetts estate tax liability 100%
of the federal estate taxes, 96% of the aggregate charitable bequests, and contribute 76%
of the aggregate bequests to heirs.
From Panel 1 of Table 19 we find that approximately 23% ($460.15 billion out of the 55
year total $1,983.46 billion) of the Boston metropolitan value of final estates will occur
by the end of 2026. During the first 20 years from 2007 to 2026, we again estimate that
359,578 final estates will occur. These 359,578 final estates amount to 25% of final
estates generated during the entire 55-year period of the simulation. The aggregate value
of these estates is $460.15 billion (23% of the aggregate value during the entire period)
with potential aggregate charitable bequests of $100.55 billion (31% of the aggregate
amount during the entire period). Almost 77% of the wealth transfer and 69% of
charitable bequests will occur later than 2026 – a greater percentage in the middle (3%)
secular growth scenario than in the 1% and 2% growth scenarios.
Table 20 presents the detailed national results of the middle (3%) secular growth
scenario with $5 million in estate tax exemption after 2012. The total transfer and its
distribution are located in the total column, which is the rightmost column in each panel.
40 The major difference between Table 19 and Table 20 are in the distribution of the value
of final estates to estate taxes, charitable bequests, bequests to heirs, and estate closing
costs and fees. When the estate tax exemption is $5 million, it generates more liability
($4.68 billion) for Massachusetts estate tax, substantially less ($393.18 billion) revenue
for the federal government, and more in bequests to charity ($119.27 billion) and heirs
($332.14 billion) during the 55-year period. In this same time frame, the value of final
estates is also $64.12 billion more in the current tax provisions with $5 million exemption
as compared with the current law with $1 million tax exemption.
Change in Millionaire Households
In 2007 there were 238,887 households in the Boston metropolitan area with at least $1
million in net worth. By the end of March, 2009 this number had dropped to 182,064
households, and by the end of 2010 it had increased somewhat to 200,896 households.
During the 55 years of the 3% growth scenario, a net addition of 83,150 households will
become millionaires, for a total of 322,037 households with net worth of at least a million
dollars.
High (4%) Secular Growth Scenario
Table 21 presents the national detailed results of the high (4%) secular growth scenario
with $1 million in estate tax exemption after 2012. It is formatted the same as Table 15.
As in Table 15 the total transfer and its distribution are located in the total column, which
is the rightmost column in each panel.
In the high growth scenario for the nation we again estimate that 1,421,598 final estates
will occur among the 2007 population of households during the 55-year period from 2007
through 2061. These final estates will be valued at $3,206.48 billion at the time of death
if wealth grows in the nation at an average annual secular rate of 4% and there is $1
million exemption in estate taxes after 2012. The model projects $58.38 billion will be
distributed to estate fees, $200.39 billion to Massachusetts estate tax liabilities, $933.67
billion to federal taxes, $629.20 billion to charitable bequests, and $1,384.85 billion to
heirs. The $629.20 billion of potential charitable bequests constitutes 20% of the
$3,206.48 billion value of final estates – 95% more than the comparable figure from the
middle growth scenario.
Once again, most of the potential charitable bequests (77%) are generated by the 2% of
final estates valued at $20 million or more. This proportion (77%) is large for two
reasons: (1) final estates with values of $20 million or more account for 47% of the
$3,206.48 billion in the value of final estates in the Boston metropolitan area, and (2) on
average, estates of $20 million or more give the largest fraction (32%) of their value to
charity as compared with estates of lesser value.
The national transfer of wealth is concentrated among wealthy final estates. Most (93%)
41 of the $3,206.48 billion of wealth transfer in the high (4%) growth scenario occurs among
the 25% of final estates with value of $1 million or more. These estates pay 88% of the
aggregate estate fees, nearly 100% of Massachusetts estate tax liability, 100% of the
federal estate taxes, 98% of the aggregate charitable bequests, and contribute 84% of the
aggregate bequests to heirs.
From Panel 1 of Table 21 we find that approximately 16% ($513.40 billion out of the 55
year total $3,206.48 billion) of the value of final estates in the nation will occur by the
end of 2026. During the first 20 years from 2007 to 2026, we again estimate that 86,906
final estates will occur. These 359,578 final estates amount to 25% of final estates
generated during the entire 55-year period of the simulation. The aggregate value of
these estates is $513.40 billion (16.0% of the aggregate value during the entire period)
with potential aggregate charitable bequests of $113.37 billion (18.0% of the aggregate
amount during the entire period). About 94% of the value of final estates and 92% of
charitable bequests will occur later than 2026 – a greater percentage in the high (4%)
secular growth scenario than in the 1%, 2%, and 3% growth scenarios.
Table 22 presents the detailed Boston area results of the high (4%) secular growth
scenario with $5 million in estate tax exemption after 2012. The total transfer and its
distribution are located in the total column, which is the rightmost column in each panel.
The major difference between Table 21 and Table 22 is in the distribution of the value of
final estates to estate taxes, charitable bequests, bequests to heirs, and estate closing costs
and fees. When the estate tax exemption is $5 million, it generates more revenue ($9.33
billion) in Massachusetts estate tax liabilities, substantially less ($663.89 billion) revenue
for the government and more in bequests for charity ($240.98 billion) and heirs ($525.26
billion) during the 55-year period. In this same time frame, the value of final estates is
also $113.66 billion more in the $5 million as compared with the $1 million tax
exemption.
Change in Millionaire Households
In 2007 there were 238,887 households in the Boston metropolitan area with at least $1
million in net worth. By the end of March, 2009 this number had dropped to 182,064
households, and by the end of 2010 it had increased somewhat to 200,896 households.
During the 55 years of the 4% growth scenario, a net gain of 195,382 households will
become millionaires, for a total of 434,269
households with net worth of at least a million dollars.
Concluding Comments
There are several issues concerning household wealth and its allocation that have not yet
been discussed or sufficiently emphasized in the report. They will briefly be presented in
this concluding section.
42 1. This study reflects an increasing pattern among affluent and wealthy households
living in the Boston metropolitan area (i.e., CBSA) to begin transferring assets
from the household portfolio to other entities as part of a general estate/legacy
plan while the wealth holders are still living. As previously discussed these
transfers tend to be larger among very wealthy households, occur when the
householder approaches retirement age and for the decade thereafter, and
generally increase as wealth increases. There are four issues related to lifetime
transfers that have not yet been discussed:
a. The transfers made during this period of life often involve donations to
non-profit organizations, family foundations, donor advised funds, and
charitable trusts and present an opportunity for the potential donor to
allocate even more than usual amounts to a broad range of charitable
causes and to experience the results of these gifts during their lifetime.
b. The wealthy donor usually plans these donations years in advance. It is
during this planning period that the discernment process is especially
relevant to the donor and is when the donor is most appreciative of
information and discussion with potential recipients; of course, many
donors want to initiate the process on their own or through intermediaries.
c. From the non-profit viewpoint, the increasingly frequent shift of wealth
transfer from giving through estates to transfers made during lifetime as
part of an estate/legacy plan means that an increasing amount of the
wealth transfer will occur earlier than if all the transfer occurred through
estates.
d. Wealth transferred from the wealth holder to charity, to heirs, and to other
entities (e.g., trusts) during the donor’s lifetime reduces the value of the
donor’s final estate and thus reduces transfers through bequests.
2. As the value of final estates increase – especially to levels beyond $20 million –
the proportion of the estate value bequeathed to charity increases dramatically in
all scenarios. In the current model, however, there are smaller proportions of final
estates in this category in comparison to our prior model because many
affluent/wealthy households transfer part of their assets to charity, to heirs, and to
other entities during their lifetimes. On a national basis, the lower number of final
estates estimated by the current model is in closer agreement with federal estate
tax statistics than the corresponding estimate produced by our previous model.
3. The exemption levels and for that matter the existence of the estate tax has a
major impact on potential for charitable giving, primarily in the form of charitable
bequests. In all scenarios the extension of current rates and a $5 million
exemption after 2012 produces a major increase in the value of charitable
bequests relative to the current law- which reverts to 2001 provisions with $1
43 million exemption after 2012. The estate tax also has an additional relatively
small effect on the total amount of wealth transfer through the amount of
inheritance received by decedents while they are still living.
4. The Massachusetts estate tax is decoupled from the federal estate tax. It is thus an
independent tax that is deductable from the federal taxable estate under current
rates but is a credit after 2001 under current law.
5. The rate of growth in Gross Domestic Product is closely related to the growth of
household wealth. The growth of household wealth, in turn, is closely related to
the amount of wealth transfer and the potential for charitable giving. In the
current study, the proportion of wealth transfer that goes to charity (through
accelerated lifetime giving and charitable bequests) increases from 15% at 1%
growth to 25% at 4% growth – the proportion of wealth transfer allocated to
charity keeps increasing with increasing growth rates.
The growth rate of the economy is important to the strength of philanthropy in the
nation because it increases the wealth and wealth transfer of its residents and also
increases the fraction of their wealth that they contribute to charity. One
implication: policies that strengthen economic growth also strengthen the longterm prospects for philanthropy.
6. In the Boston metropolitan area the long-term rate of growth since 1997 is 2.4%
for real GDP, 1.8% for real personal income, and 0.6% for unearned income
(inclusive of capital gains). During this period Boston’s manufacturing sector
shrank and its research, technical, scientific, and finance sectors grew. Boston’s
unemployment rate during this period was below the national average and
remains so at the present time.
Our study presents findings for growth scenarios that range from 1% to 4%. In
the past we felt that 2% was a conservative assumption regarding growth. It
appears less conservative at the current juncture because of the slow rate of
growth of the national economy. However, the Boston area has been growing
above the national rate. Consequently, we think that a conservative estimate of
growth in the Boston area is likely to be close to the 2% scenario and not likely to
exceed the 3% scenario during the 55-year time frame.
7. The estimates in this report are approximations that depend not only on economic
growth but also on the continued efforts of the Boston Foundation, other
community foundations, non-profit organizations and other groups focused on
supporting philanthropic efforts to work effectively to strengthen philanthropic
initiatives. Our estimates will be too high if these efforts are not continued and
our estimates will be too low if these efforts become even more effective and
energetic.
44 8. In addition to the economy and organizations devoted to philanthropy, the state
depends on the skills, character, and moral compass of its residents to devote their
time and treasure in responsible ways to care for themselves and for each other.
The wise use of their physical, financial, mental, and spiritual resources to extend
care to others says more about the state and its residents than does than the
economy or even the charitable organizations.
45 Methodological Appendix
This appendix documents the details of how the estimates were determined. It explains
an expansion in the conceptualization and definition of wealth transfer and how this
affects the overall design of the model. It describes the microdata file for the Boston
Core Based Metropolitan Area. It then continues with a description of the model and
how it works. It concludes with a description of the method used to estimate and project
national charitable giving.
Update Strategy
Our strategy to update the model was to use the most recent data available from the
sources used in our original model to update the current version of the model. When we
conducted this work in the spring of 2011, the most recent data for wealth and mortality
data was for the year 2007; and 2007 thus became the base year of the model. We
updated the model’s microdata file based on data from the 2007 Survey of Consumer
Finances, updated the model’s mortality rates based on 2007 data from the Center on
Disease Control and Preventions, updated life cycle savings rates based on federal
reserve data for 1992 through 2007, and updated historical parameters regarding estate
tax distribution based on 2006, 2007, and 2008 estate tax data from the Statistics of
Income Division of the IRS.
Expansion Strategy
Our strategy to expand the model was to develop and test the relevant modules and then
install them in the model. We developed separate modules for each area of expansion:
categorization of assets, transfers of assets during lifetime, estate tax liability, and
portfolio reorganization. Due to the recession we also expanded the model to adjust for
the impact of the recession on wealth.
Wealth Transfer Estimation Strategy
Our strategy to arrive at projections of wealth transfer was to apply the model to a
representative sample of household wealth in 2007. However, household wealth fell
precipitously in 2008 and 2009, and recovered only slightly in 2010. We therefore used
data from reliable sources to revalue household assets and portfolio compositions in each
of the recessionary years to reflect the impact of the recession on household wealth.
Strategy for Projecting Charitable Giving
Our research strategy to project charitable giving was to develop an estimate of
household giving along trend and augment it by the lifetime accelerated charitable giving
(lifetime giving over and above the trend value) estimate and the charitable bequest
estimate provided by the WTMM.
46 Expanded Conceptualization of Wealth Transfer
Since our original work on wealth transfer in 1998 we have found that as wealth holders
planned for the eventual transfer of their assets their plans expanded from the confines of
their will and their estate to include transfers of some of their household assets during
their own lifetime - assets that would have been part of their estates in prior decades.
This is reflected in the substantial growth in assets of foundations, donor advised funds,
split-interest charitable trusts, non-charitable trusts, and limited partnerships –statistics
we can track as reported by organizations that focus on these entities as well as in federal
tax statistics for selected entities. Anecdotal evidence by those advising wealth holders in
issues of estate planning and wealth transfer also confirms the increase in lifetime
transfers as part of the planning process. We have therefore expanded our concept of
wealth transfer to include both lifetime transfers made as part of a plan focused on
transfer of assets and bequests made through estates at death. This is a broader
conceptualization than that used in our earlier work and reflects the realities of the time.
We used this broader conceptualization in expanding, updating, and applying our wealth
transfer model as well as in our methodology to more accurately estimate potential
charitable giving.
Survey of Consumer Finances
The wealth transfer microsimulation model (WTMM) was designed to use a subset of
data from the Survey of Consumer Finances (SCF) as its national microdata file. The
SCF is conducted every three years for the Board of Governors of the Federal Reserve
[National Opinion Research Center, 1992, 1995, 1998, 2001, 2004, and 2007]. The most
recent available survey at the time of the current study was conducted in 2007. Data
from the 2010 survey was released in the summer of 2012 but would require extensive
processing before installation in the model, and this processing was beyond the scope of
both the timeline and the financial resources available.
There are 4,418 households in the 2007 survey sample: 2,915 households selected in a
representative sample and 1,503 in an oversample of wealthy households, selected from
IRS income tax returns. The staff of the Federal Reserve calculates weights that permit
the two samples to be combined to represent the population of all households. With
respect to content, the SCF contains detailed information concerning assets owned,
income earned, debt owed, inheritance expected or received, employment history, and
demographic characteristics. The SCF also contains a question concerning inter vivos
giving of cash and in-kind charitable donations6 as well as questions concerning family
foundations and their assets. The two most important characteristics of the SCF with
respect to wealth transfer are: (1) it contains sufficient detail about the full portfolio of
each household to support a reliable estimate of net worth at the household level, and (2)
unlike most other surveys, it includes a large group of wealthy households that supports
6 The SCF ignores annual donations of less than $500 per household. At CWP we developed a method to approximate the value of contributions of less than $500 based on data from the General Social Survey conducted by the National Opinion Research Center. 47 reliable estimates for this group, which gives disproportionately large amounts to charity.
Boston CBSA Microdata File
Based on data from the Current Population Survey, the American Community Survey,
and the Survey of Consumer Finances, we estimated the distribution of household wealth
in the Boston metropolitan area in 2007. This process was the result of more than a
decade’s research on the relationships among assets and debt, on one hand, and
components of income, economic characteristics, and sociodemographic characteristics
on the other.
Imputation of Wealth
The key limitation to applying the WTMM to the Boston CBSA is the lack of data
concerning the distribution of net worth of households in the Boston area. There is
partial data on state and metropolitan area assets from a variety of sources but there is no
sufficiently large representative sample of either Massachusetts or Boston area
households with a reliable comprehensive distribution of household net worth.
Shortly before the turn of the century, we began to explore the possibility of using
relationships among variables on the SCF to impute net worth to households in the
Current Population Survey (CPS) based primarily on components of income, home
ownership, and demographic characteristics. The 2007 March Supplement of the CPS is
based on a sample of approximately 99 thousand households, representative by state and
large metropolitan areas. It contains detailed information on income, household
structure, employment, and demographic characteristics, but very sparse information on
wealth.
In our exploration of the feasibility of imputing wealth to households in the CPS sample,
we had the ambitious objective of estimating the distribution of household wealth within
states and large metropolitan areas. At the national level the goal was to estimate the
national distribution of household wealth based on the imputed measure in the CPS
sample. The SCF provides an independent estimate of this distribution. Using the SCF
distribution as a criterion, therefore, we wanted to develop, for each household on the
CPS, an imputed measure of wealth whose distribution matched the distribution of wealth
from the SCF.
We began our development efforts by adapting an approach used by the Federal Reserve
to predict household wealth based on components of income [Frankel and Kennickell,
1995; Kennickell, 1993, 1999, and 2001] which the Fed uses to select its high wealth
oversample based on income information from IRS income tax filings. The results were
promising but not sufficiently reliable, especially at very high, lower middle, and low
levels of wealth. We modified some of the variables we had been using (e.g. replaced
median value of housing with average value of housing), added a number of demographic
characteristics (e.g., marital status, age, education, race), and developed our own
proprietary procedure to impute household wealth to households in the Current
48 Population Survey. In the process we gave more emphasis to macro level accuracy of the
distribution than to micro level household accuracy of imputed wealth.
In 2010 we started to explore using the American Community Survey (ACS) as well as or
as a replacement for the CPS. The ACS is a nationally representative sample of
approximately 3 million households conducted annually by the Bureau of Census. It is
representative by state, county, large cities, and metropolitan areas. It has extensive
information concerning income and demographic characteristics. Other than housing it
has little information about wealth. Although it measures most income categories, it
groups interest, dividend, rent, royalty, and trust together in a single category.
We discovered that application of the methodology we had used for 2001 data was
insufficient to attain the degree of accuracy we had previously achieved because some of
the variables used in this methodology reflect transitory relationships that held in 2001
but no longer held in 2007. The difficulty manifested in both CPS and ACS data.
We had to back up a step from what we had anticipated to revisit the process by which
we had developed the 2001 methodology. After several weeks we identified new
transitory relationships in 2007 that could be used in place of the ones used in 2001 (both
methods also relied on stable relationships but these proved insufficient by themselves to
achieve the high degree of reliability required for state level estimation and analysis).
During this period it became clear that the more detailed number of components of
income as well as the presence of other data in the CPS outweighed the larger sample size
of the ACS for states with small populations. In small states we relied on CPS data
augmented by the ACS to impute household wealth; in larger states we relied on ACS
data augmented by CPS for the imputation.
Assessment of Imputation Measure
The goal of the imputation procedure is to estimate the distribution of wealth within
states and large metropolitan areas. We succeeded in the sense that the national
distribution of household wealth based on the imputed measure on the CPS/ACS sample
has the same mean and nearly the same standard deviation as the national distribution
based on the SCF; the median and quartiles of the imputed distribution are also within 1.5
percent of their counterparts in the wealth distribution from the SCF. Moreover, the age
distribution of imputed wealth is within 3.5 percent of the age distribution of household
wealth on the SCF. The means of the imputed wealth measure from the CPS/ACS are
usually within 5 percent of the means of wealth on the SCF within categories of
demographic characteristics not included in the imputation procedure. On a national
basis for 2007, the imputed measure appears to have good national distributional
properties in the base year.
Based on our previous work and confirmed by our current work, we conclude that it is
necessary that the SCF, the CPS, and ACS be for the same year, since some of the
relationships used in the imputation are more associational and transitory than behavioral
49 or causal. This is the reason that the base year of the imputation and the base year of the
wealth transfer analysis is 2007, the most recent vintage of SCF data.
Although the imputation reproduces the distribution of wealth nationally, there was no
guarantee that it would do so for states and metropolitan areas. Clearly, since the
imputed measure is derived from the income, home ownership, and demographic
characteristics specific to each state and metropolitan area, a case can be made that it
should be a good estimate of the wealth of these states and metropolitan areas. We
looked at work on the distribution of wealth by states conducted by Barry Johnson and
his colleagues at the Statistics of Income (SOI) Division of the IRS [Johnson and
Schreiber, 1998]. This work used the value of estates from federal estate filings together
with mortality rates and state demographic profiles from the Bureau of Census to
estimate wealth in the state of filing. The rank order correlation for state wealth
generated by the SOI technique and our imputed measure was near zero – the two
measures were uncorrelated. However, in 1996 Robert and Jon Haveman estimated
wealth at the state level based on asset and debt information collected as part of the
Survey of Income and Program Participation (SIPP) [Haveman and Haveman, 1996].
The rank order correlation between the Haveman measure from 1996 and our imputed
measure for 2001 was 0.67 – a fairly close relationship given the intervening years and
the fact that SIPP has oversamples of low income households but no oversample of high
wealth households. The Haveman measure also had near zero rank order correlation with
states ranked by the SOI measure of wealth. We concluded that the SOI measure may
not be an effective measure for generating the entire distribution of wealth for the entire
population of a state and that our imputed measure was superior at least with respect to
generating state distributions.
As a final assessment of the imputed measure we applied it to states and metropolitan
areas in New England. It agreed with our perceptions of wealth in these states and
metropolitan areas. This constituted a minimal criterion rather than strong evidence of
regional accuracy of the measure. However, the measure passed this minimal test.
In summary our imputed measure replicates the national distribution of household wealth
very closely, is based on population and household characteristics measured in the CPS
and ACS for states and metropolitan areas, and closely agrees with the only other study
we found based on household survey data. We conclude the imputed measure appears to
be a good measure for generating the distribution of household wealth for states and large
metropolitan areas.
Calibrating the Microdata File to the Boston CBSA
The process of developing the microdata file for the Boston CBSA involves marrying the
information from three sources: (1) the national relationships among wealth and
inheritance variables from the 2007 SCF, (2) the wealth and demographic distributions
for Massachusetts and the Boston CBSA from the CPS/ACS, and (3) the aggregate
national wealth totals from the Flow of Funds Accounts published by the Federal
Reserve.
50 In our estimates of wealth transfer we have reconciled the aggregate amount of household
wealth derived from the SCF with an independent, more comprehensive estimate from
the Flow of Funds Accounts. We assume that the Flow of Funds estimate is more
accurate at the aggregate level than the survey estimate due to variations of sampling.
Since very high wealth holders (households with more than $50 million in wealth) are
relatively rare, the proportion included in the sample varies from year to year, and their
wealth is so large that even modest variations in the proportions of high wealth holders in
the sample has an effect on the estimate of aggregate wealth derived from the survey. In
2007 we adjusted the shape of the extreme tails of the SCF wealth distribution to a
weighted average shape of the distributions in 1992, 1995, 1998, 2001, and 2004. After
this adjustment, the estimate of aggregate household wealth based on the survey estimate
was within 2 percent of the estimate based on the Flow of Funds Accounts.
The imputed measure of wealth allowed us to estimate the overall distribution of
household wealth for the Boston CBSA and breakdowns of this distribution by
demographic characteristics important to the estimation of wealth transfer (i.e., age,
marital status, race, and gender of not married). The imputed measure, however, is less
accurate at the household level (since we had emphasized distributional accuracy over
household accuracy when developing the imputation measure). In contrast, the SCF
measures household wealth and household demographic characteristics at a national
level, but its distributions of both household wealth and demographic characteristics do
not match those for the Boston CBSA.
We wanted to calibrate the microdata file for the Boston CBSA in such a manner that it
would combine the metropolitan distributional properties with the household accuracy of
the SCF. Since the SCF and CPS/ACS were both describing the population in 2007, we
married the data from both files by mapping the SCF into the Boston CBSA distributions
as derived from the CPS/ACS (with the imputed measure of wealth). The resulting file,
adjusted for different sample sizes, constitutes the Boston CBSA microdata file, which
was used by the WTMM to produce the estimates of wealth transfer for the Boston
metropolitan area. This method of marrying the two sets of data has three beneficial
properties: (1) it reestablished the accuracy of wealth in relation to demographic
characteristics at the household level; (2) it maintained the distributions based on the
CPS/ACS; (3) it contained all the variables (in addition to wealth) that are required by the
WTMM to estimate wealth transfer.
Assessment of Calibration
The two most important distributions for the estimate of wealth transfer in the Boston
metropolitan area are (1) the distribution of household wealth in the Boston CBSA and
(2) the distribution of average household wealth by age of head. These distributions were
presented in the findings section. A comparison of these distributions for the Boston area
reveals that the distributions based on the remapped file (used to produce the wealth
transfer estimates) differ by less than 0.3% from the corresponding distributions based on
the CPS data for the Boston metropolitan area. The remapped data faithfully reproduced
51 the distributions of household wealth based on the imputed wealth measures for Boston
area households in the CPS sample.
Boston Metropolitan Area Charitable Giving along Trend
Independent of this study, we previously calculated total charitable giving by households
in Massachusetts as part of the calculation of giving indices for each state in the nation.
The Massachusetts value in 2007 was $5.468 billion. From ACS data we determined that
the Boston CBSA contained about 66% of the households and 73% of the state’s
household wealth in 2007. Household donations in the Boston CBSA was estimated to
be $4.016 billion in 2007. We projected these values along trend, or baseline of giving
for each of the growth scenarios. In addition, the additional amount given to charitable
organizations, family foundations, and donor advised funds in conjunction with estate
planning was also estimated. These values are calculated by the expanded WTMM. The
model also calculates charitable bequests. Thus, in each scenario, there are estimates of
charitable baseline lifetime charitable giving, accelerated lifetime charitable transfers,
and potential for charitable bequests. Their sum constitutes the estimate of potential total
to charity.
Adjustment for Recession
The WTMM adjusts for the recession by adjusting the assets and debt of each household
in its microdata file as it runs the simulation. It makes these valuations in a two step
process: (1) adjust the individual assets in each household’s portfolio for changes in asset
prices and (2) adjust the revalued assets from step 1 for changes in portfolio composition
Independent price indices were used to adjust the prices. For the Boston metropolitan
area the indices included the National Association of Realtors Housing and Real Estate
indices, the DOW Wilshire 5000 index, the former Lehman Brothers Bond and Note
Indices (now administered by Barclays Bank of London), the Manheim Used Car Index,
the Bureau of Labor Statistics Vehicle Index, etc.
The changes in portfolio composition were based on aggregate changes derived from
Federal Reserve data.
Areas of WTMM Expansion
As indicated in the body of the report, the 2012 version of the WTMM contained
enhancements and expansions in five major areas:
1. Asset Groupings
Assets were grouped into four categories: real estate, other tangible assets (mostly
vehicles), business equity, and financial assets. In the expanded WTMM each
asset category can be assigned its own secular growth rate that permits, for
52 example, real estate to grow more slowly than business equity and business equity
to grow more slowly than financial assets. At some future date, the secular rates in
each category could be made time-dependent so that each asset category can be
represented as a time-dependent profile of annual growth rates.
2. Wealth Adjustments for Recession
The WTMM was expanded to adjust the values of household assets and debt to
historical values based primarily on changes in valuation of assets in each
household portfolio. These adjusted values supersede the secular growth rates for
the years in question. Thus the expanded model adjusts the valuation of each
household’s portfolio in 2008, 2009, and 2010 for the effects of the recession on
both the value and distribution of household wealth. This modification permits the
WTMM with a base year of 2007 to estimate wealth transfer during and after the
recession. After 2010 the model uses its original secular growth rates to estimate
household wealth.
3. Lifetime Transfers of Assets
The concept of wealth transfer was extended in the expanded version of the
WTMM to include transfers made to heirs and other entities through trusts and
other vehicles of asset transfer in conjunction with estate planning during lifetime.
Similarly the model itself was expanded to calculate the amount of asset transfers
during lifetime in addition to the amount of asset transfers at death. The sum of
these two components constitutes the WTMM estimate of wealth transfer.
The asset transfers during lifetime were estimated from portfolio analysis of
successive triennial Surveys of Consumer Finances. These transfers were further
divided into known transfers to charitable organizations (including family
foundations, charitable trusts, and donor advised funds) and transfers to other
entities that may also have entailed gifts to charitable organizations7 in addition to
transfers to financial vehicles such as trusts and limited family partnerships.
4. Estate Tax Simulation Sub-Model
An estate tax simulation sub-model was developed, tested, and installed in the
WTMM. This sub-model estimates tax liability for final estates (estates with no
surviving spouse) and also distributes the estate value among taxes, charitable
bequests, bequests to heirs, and estate closing costs. The estimates and the
distribution vary depending on the asset value of the estate.
7
The IRS data indicate that these trusts make charitable donations of several billion dollars per year and
that some of them are reorganized as charitable trusts each year. The lifetime charitable estimate is
therefore a conservative estimate.
53 This sub-model replaces the prior distribution algorithm that was based on
historical patterns of tax liability and distribution in the base year. The new submodel incorporates the base year distribution but modifies tax liability depending
on provisions of the estate tax law in effect at the time of death. Under current law
the estate taxes will revert to a $1 million exemption, higher tax rates, and no
portability at the end of 2012. The new sub-model takes these changes into
account; the previous module did not.
5. Massachusetts Estate Tax Module
New software to simulate the Massachusetts estate tax was developed, tested, and
installed and integrated in the estate tax section of the WTMM. It used the
parameters for Massachusetts as they existed in 2007 and subsequently modified
through 2010. The provisions were assumed to remain constant during the time
frames of the scenarios analyzed in this study. The software incorporated the
major provisions of the Massachusetts estate law, the major allowed deductions,
the exemption level, and the marginal rates.
6. Portfolio Reorganization
A portfolio reorganization module was developed, tested, and installed in the
WTMM. Major changes in the composition of portfolios take place mostly at ages
65 to 75 and mostly among affluent or wealthy households. During this time
households divest themselves of substantial amounts of real estate and business
equity and to a lesser extent financial assets as well. They also make major
lifetime transfers during this period of portfolio reorganization. The portfolio
reorganization module captures changes in portfolio composition as well as
estimating lifetime transfers of assets.
The WTMM and How it Works
The Wealth Transfer Microsimulation Model (WTMM) was designed and developed at
the Center on Wealth and Philanthropy (CWP) (then known as the Social Welfare
Research Institute) at Boston College. Updated and expanded in the past year, the model
simulates wealth transfer, lifetime transfers of assets as part of wealth transfer, the
number and value of final estates for households that existed in 2007 during a 20-year
period, which in this analysis extends from 2007 through 2026, inclusive, and also during
a 55-year period, which extends from 2007 through 2061.
The WTMM incorporates the concept of final estates. A final estate is an estate without a
surviving spouse – that is, the estate of a widowed, divorced, or never married decedent.
When one of two spouses die the WTMM assumes that the wealth of the decedent is
transferred to the surviving spouse. In this case a final estate occurs only when the
54 surviving spouse dies. A final estate also occurs at the death of all other heads of
household (i.e., never married, divorced, or widowed heads of household)
The WTMM assumes that household wealth grows along secular trends consistent with
growth in the gross domestic product of the economy. The rates of growth define each of
four scenarios (1%, 2%, 3%, and 4% rates of secular growth, respectively). A major
assumption of the analysis is that there will be no sustained period of major economic
downturn or upturn other than that captured by the growth rates during the 55-year period
of the analysis (2007 through 2061). There will, of course, be economic cycles during
this period. The WTMM assumes only that none of these cycles will result in a long
period (5 years or more) of sustained economic depression below, or booming economic
growth above, the secular rates.
The WTMM does not generate births, marriages, or divorces nor does it develop new
household businesses, although it does divest some wealthy household of existing
business assets in the course of the simulation. It assumes that people die at the 2007
national rates (by age, gender, and race) published by the National Center for Health
Statistics based on data from the Center of Disease Control and Prevention.
The WTMM does assume that there are variations in the rate of growth in household
wealth, depending on the age of head of household. These life cycle variations are due to
periods of accelerated rates of accumulation, periods of distribution, variations in savings
rates, variations in consumption rates, drawdown of assets at the end of their lifecycle for
households of modest means, gifting of assets predominantly among affluent and wealthy
households, and lifetime transfers of assets in connection with wealth transfer plans. The
WTMM assumes that for the next 55 years the pattern of life cycle variations in the rate
of growth in household wealth is represented by the current pattern estimated from data
from the 1992, 1995, 1998, 2001, 2004, and 2007 SCF. The model has been modified to
accommodate increases or decreases in the amounts or prevalence of selected inter vivos
gifts (such as charitable remainder trusts and transfers to family foundations) among
wealthy households during the period.
The WTMM applies the mortality rates, secular growth rates, and life cycle variations to
each household to estimate both lifetime transfer of assets as part of wealth transfer as
well as the number and value of final estates. For each final estate, its value is distributed
to government, charity, heirs, and estate costs based on historical patterns. These patterns
depend on the asset value of the estate. The patterns are based primarily on data from
federal estate tax filings for 1998 through 2009. The pattern indicates that as asset levels
of estates increase, the proportion of the value of the estate bequeathed to charity
increases substantially, up to an average of 34% for estates with assets of $20 million or
more. The WTMM assumes that the national historical pattern, adjusted for changes in
the estate tax law, holds for the nation during the period of the simulation.
The expanded version of the WTMM modifies the historical proportions of the value of
estates distributed to government by an adjustment based on changed estate tax liability
based on current estate tax law as reflected in The Economic Growth and Tax Relief
55 Reconciliation Act of 2001 and The Tax Relief, Unemployment Insurance Authorization
and Job Creation Act of 2010. Specifically the WTMM estimates the government share
of the estate based on its asset value and the historical proportion paid in estate taxes.
Using an estate tax simulation sub-model the WTMM then calculates the estate tax
liability under estate tax provisions in effect in 2007 and estate tax provisions in effect for
the year being simulated. The proportion of new to old tax liability is applied to the
historical estimate of estate taxes paid (which reduces this amount for estates that paid
estate taxes). Adjusting for gift taxes, the resulting change (increase or reduction) in
estate taxes paid is allocated as changes in the opposite direction (reduction or increase)
to charity and heirs, proportional to the historical percentages distributed to charity and
heirs for the given household. This allocation is consistent with the proposition that
reductions in the estate tax will increase charitable giving [Schervish, 2001]. Since the
WTMM does not support hysteresis (asymmetry of reaction, in this case to tax changes),
the allocation also reflects the proposition that increases in the estate tax will decrease
charitable giving.
With a few weeks additional work, the expanded WTMM can be further modified to
estimate wealth transfer at the national level by race. Because of small sample sizes,
however, breakdowns of wealth transfer estimates by race would be unreliable for states
with modest populations, and the model has not yet been expanded to include this
capability.
The WTMM runs in constant (inflation adjusted) dollars for 2007. All internal
calculations and all estimates are calculated in 2007 dollars.
Lifetime Charitable Giving
The expanded WTMM estimates two components of potential charitable giving:
charitable bequests through estates and transfer of assets made as part of wealth transfer.
The third component, inter vivos charitable giving along secular trend, which we
sometimes call lifetime baseline giving along trend, is estimated in a separate analysis
independent of the model. The independent analysis is based on the aggregate amount of
household giving 2007, as developed by CWP as part of our index of charitable giving
relative to income, adjusted for taxes and cost of living. This baseline amount is
projected along secular trend based on the growth rates used in each wealth transfer
scenario.
Data and Parameters
Via its microdata file, WTMM uses the relevant demographic characteristics for United
States households derived from the SCF and augmented by data from the ACS and CPS.
It uses distribution of wealth in 2007 based primarily on the SCF, calibrated to
independent estimates of household wealth from the Flow of Funds accounts of the
Federal Reserve. For the recessionary years of 2008, 2009, and 2010, the WTMM
adjusts the wealth for each household in the microdata file for historical changes in
56 valuation (as described above) and for changes in portfolio composition. Using this
procedure it adjusts for the recession through 2010 and applies its secular growth rates
thereafter.
The WTMM uses parameters based on national statistics. It uses the final mortality rates
for 2007 published by the National Center for Health Statistics based on data from the
Center of Disease Control and Prevention. It uses historical data from the Statistics of
Income Division of the Internal Revenue Service. This data consists of average patterns
(1998-2008) of distribution of estates, net of surviving spouse deductions, where the
distributions are defined in terms of the percentage of the net value distributed to estate
fees, charitable deductions, estate taxes, and heirs. The WTMM also uses life cycle
variations in the growth of wealth calculated from the 1992, 1995, 1998, 2001, 2004 and
2007 SCF.
Scenarios
The national estimates of wealth transfer and national potential for charitable giving have
been calculated for four scenarios, differentiated by the rate of secular growth in
household wealth. The sluggish growth scenario assumes a 1% real (inflation adjusted)
rate of secular growth and lower than average rates of life cycle savings. The moderately
low growth scenario assumes a 2% real (inflation adjusted) rate of secular growth and
also somewhat lower than average rates of life cycle savings. The middle growth
scenario assumes a 3% real rate of secular growth and average rates of life cycle savings.
The high growth scenario assumes a 4% real rate of secular growth and above average
rates of life cycle savings.
Within each scenario there are two sub-scenarios: one reflects current law in which the
tax provisions will revert to the 2001 version with a $1 million exemption level beginning
in 2013. The second is based on rates and provisions in effect in 2011 and envisions a $5
million exemption level in effect in 2011 will be retained in 2013 and thereafter.
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Table 1: Distribution of Household Net Worth for Boston CBSA and the Nation in 2007
In Millions of Inflation-Adjusted 2007 Dollars
September 20, 2012
Boston CBSA
Households
Percent
of HH
Cum %
Nation
Net Worth
(millions)
Cum %
Mean Net
Worth/HH
Households
Percent
of HH
Cum %
Net Worth
(billions)
Cum %
Mean Net
Worth/HH
Household Net Worth (2007 dollars)
Negative or Zero
165,236
9.59%
100.00%
-$2,594 100.00%
-$15,699
12,187,577
10.50%
100.00%
-$172 100.00%
-$14,078
$1 to $199,999
750,797
43.57%
90.41%
$48,423 100.19%
$64,495
58,814,621
50.64%
89.50%
$3,670 100.30%
$62,397
$200,000 to $499,999
339,585
19.71%
46.84%
$106,924
95.73%
$314,866
23,144,901
19.93%
38.86%
$7,293
93.98%
$315,089
$500,000 to $999,999
228,704
13.27%
27.13%
$160,478
86.28%
$701,684
12,618,865
10.87%
18.93%
$8,766
81.43%
$694,659
$1,000,000 to $4,999,999
201,074
11.67%
13.86%
$392,841
73.91%
$1,953,719
7,631,104
6.57%
8.06% $14,982
66.35%
$1,963,233
$5,000,000 to $9,999,999
21,248
1.23%
2.19%
$149,471
44.54%
$7,034,595
1,026,352
0.88%
1.49%
$7,340
40.58%
$7,151,414
$10,000,000 to $19,999,999
9,865
0.57%
0.96%
$134,857
29.01% $13,669,637
483,492
0.42%
0.61%
$6,427
27.95% $13,293,840
$20,000.000 or More
6,700
0.39%
0.39%
$360,627
12.29% $53,826,275
215,216
0.19%
0.19%
$9,819
16.89% $45,624,369
1,723,209
100.00%
$1,351,027
$784,018
116,122,126
100.00%
$58,125
$500,549
ALL
Source: Calculated at the Center on Wealth and Philanthropy at Boston College based on federal data.
Average HH Net Worth:
Median HH Net Worth:
Upper Decile:
Lower Decile:
Adjusted for Cost of
2007 Dollars Living in 2007
$784,018
$670,101
$170,250
$145,512
$1,237,320 $1,057,538
$100
$85
Adjusted for Cost of
2007 Dollars Living in 2007
$500,549
$500,549
$114,380
$114,380
$833,000
$833,000
$0
$0
Cost of Living:
117.00% of national average
100.00% of national average
Table 2: Distribution of Household Net Worth for Boston CBSA and the Nation in 2008
In Millions of Inflation-Adjusted 2007 Dollars
September 20, 2012
Boston CBSA
Households
Household Net Worth (2007 dollars)
Negative or Zero
219,293
$1 to $199,999
751,048
47.62%
87.65%
$200,000 to $499,999
328,749
18.88%
40.04%
$103,948
$500,000 to $999,999
222,277
10.78%
21.16%
$1,000,000 to $4,999,999
167,834
8.11%
$5,000,000 to $9,999,999
19,906
$10,000,000 to $19,999,999
$20,000.000 or More
ALL
Cum %
Nation
Percent
of HH
12.35%
100.00%
Net Worth Cum %
(millions)
-$4,258 100.00%
Mean Net
Worth/HH
-$19,418
$46,776 100.35%
Households
15,811,525
Percent
of HH
13.62%
Cum %
Net Worth Cum %
(billions)
100.00%
-$282 100.00%
$62,280
60,064,650
51.73%
86.38%
$3,637 100.56%
95.24%
$316,194
21,402,191
18.43%
34.66%
$6,785
93.37%
$317,003
$156,716
84.83%
$705,050
10,984,090
9.46%
16.23%
$7,613
79.98%
$693,092
10.38%
$335,129
71.83%
$1,996,785
6,284,524
5.41%
6.77% $12,538
64.95%
$1,995,082
1.43%
2.27%
$139,872
43.62%
$7,026,479
1,020,107
0.88%
1.36%
$7,197
40.19%
$7,055,338
8,324
0.67%
0.84%
$115,899
26.02% $13,922,682
387,066
0.33%
0.48%
$5,279
25.98% $13,638,171
5,776
0.17%
0.17%
$311,744
9.74% $53,969,405
167,975
0.14%
0.14%
$7,881
15.56% $46,917,422
1,723,209
100.00%
$1,205,826
$699,756
116,122,126
100.00%
$50,648
$436,165
Source: Calculated at the Center on Wealth and Philanthropy at Boston College based on federal data.
Average HH Net Worth:
Median HH Net Worth:
Upper Decile:
Lower Decile:
Adjusted for Cost of Living
2007 Dollars in 2008
$699,756
$603,238
$139,082
$119,898
$1,137,938
$980,981
-$799
-$689
Adjusted for Cost of
2007 Dollars Living in 2008
$436,165
$436,165
$87,380
$87,380
$737,812
$737,812
-$1,344
-$1,344
Cost of Living:
116.00% of national average
100.00% of national average
Source: Calculated at Center on Wealth and Philanthropy at Boston College based on CBSA Data and the CWP Wealth Transfer Microsimulation Model.
Mean Net
Worth/HH
-$17,814
$60,557
Table 3: Distribution of Household Net Worth for Boston CBSA and the Nation in 2009
In Millions of Inflation-Adjusted 2007 Dollars
September 20, 2012
Boston CBSA
Households
Household Net Worth (2007 dollars)
Negative or Zero
259,090
$1 to $199,999
763,304
47.70%
85.18%
$200,000 to $499,999
315,366
18.13%
37.48%
$102,447
$500,000 to $999,999
203,385
9.91%
19.36%
$1,000,000 to $4,999,999
150,080
7.37%
$5,000,000 to $9,999,999
19,320
$10,000,000 to $19,999,999
$20,000.000 or More
ALL
Cum %
Nation
Percent
of HH
14.82%
100.00%
Net Worth
Cum %
(millions)
-$6,294 100.00%
Mean Net
Worth/HH
-$24,293
$48,827 100.57%
18,702,934
Percent
of HH
16.11%
$63,968
60,672,626
52.25%
83.89%
$3,703 100.90%
94.94%
$324,852
19,690,010
16.96%
31.64%
$6,315
92.89%
$320,708
$144,422
83.99%
$710,093
10,091,537
8.69%
14.69%
$7,006
79.23%
$694,254
9.44%
$300,735
70.93%
$2,003,828
5,535,530
4.77%
6.00% $11,418
64.08%
$2,062,685
1.36%
2.07%
$134,077
42.41%
$6,939,716
937,280
0.81%
1.23%
$6,582
39.39%
$7,022,979
7,051
0.57%
0.72%
$97,378
24.23% $13,810,183
340,392
0.29%
0.42%
$4,619
25.15% $13,570,968
5,613
0.15%
0.15%
$290,738
9.22% $51,797,296
151,818
0.13%
0.13%
$7,012
15.16% $46,187,354
1,723,209
100.00%
$645,499 116,122,126
100.00%
$46,240
$398,203
$1,112,330
Households
Cum %
Net Worth Cum %
(billions)
100.00%
-$416 100.00%
Source: Calculated at the Center on Wealth and Philanthropy at Boston College based on federal data.
Average HH Net Worth:
Median HH Net Worth:
Upper Decile:
Lower Decile:
Adjusted for Cost of Living
2007 Dollars in 2009
$645,499
$551,709
$119,940
$102,513
$1,049,678
$897,161
-$3,964
-$3,388
Adjusted for Cost of
2007 Dollars Living in 2009
$398,203
$398,203
$73,057
$73,057
$679,830
$679,830
-$5,935
-$5,935
Cost of Living:
117.00% of national average
100.00% of national average
Source: Calculated at Center on Wealth and Philanthropy at Boston College based on CBSA Data and the CWP Wealth Transfer Microsimulation Model.
Mean Net
Worth/HH
-$22,240
$61,036
Table 4: Distribution of Household Net Worth for Boston CBSA and the Nation in 2010
In Millions of Inflation-Adjusted 2007 Dollars
September 20, 2012
Boston CBSA
Households
Nation
Household Net Worth (2007 dollars)
Negative or Zero
244,043
Percent
of HH
13.60%
$1 to $199,999
738,037
47.08%
86.40%
$200,000 to $499,999
323,503
19.06%
39.32%
$102,962
$500,000 to $999,999
216,730
10.29%
20.26%
$1,000,000 to $4,999,999
167,555
7.82%
$5,000,000 to $9,999,999
19,745
$10,000,000 to $19,999,999
$20,000.000 or More
ALL
Cum %
Net Worth Cum %
(millions)
100.00%
-$5,821 100.00%
$45,605 100.49%
Mean Net
Households
Worth/HH
-$23,853 17,152,469
Percent
of HH
14.77%
Cum %
Net Worth Cum %
(billions)
100.00%
-$371 100.00%
Mean Net
Worth/HH
-$21,630
$61,792
60,106,144
51.76%
85.23%
$3,594 100.76%
95.33%
$318,272
20,804,540
17.92%
33.47%
$6,628
93.36%
$318,571
$152,622
84.34%
$704,202
10,623,306
9.15%
15.55%
$7,425
79.70%
$698,904
9.97%
$332,042
71.22%
$1,981,695
5,943,694
5.12%
6.40% $12,156
64.41%
$2,045,164
1.37%
2.14%
$138,821
42.39%
$7,030,545
968,865
0.83%
1.28%
$6,850
39.36%
$7,070,417
7,953
0.62%
0.77%
$110,504
24.74% $13,893,804
366,362
0.32%
0.45%
$4,985
25.25% $46,366,004
5,643
0.15%
0.15%
$289,745
8.97% $51,349,209
156,747
0.13%
0.13%
$7,268
14.97% $46,187,354
1,723,209
100.00%
$676,922 116,122,126
100.00%
$48,535
$417,963
$1,166,479
Source: Calculated at the Center on Wealth and Philanthropy at Boston College based on federal data.
Average HH Net Worth:
Median HH Net Worth:
Upper Decile:
Lower Decile:
Adjusted for Cost of
2007 Dollars Living in 2010
$676,922
$573,663
$132,414
$112,215
$1,134,533
$961,468
-$2,592
-$2,197
Adjusted for Cost of
2007 Dollars Living in 2010
$417,963
$417,963
$79,873
$79,873
$718,646
$718,646
-$3,868
-$3,868
Cost of Living:
118.00% of national average
100.00% of national average
Source: Calculated at Center on Wealth and Philanthropy at Boston College based on CBSA Data and the CWP Wealth Transfer Microsimulation Model.
$59,799
Table 5: Average Household Net Worth by Age of Head for Boston CBSA and the Nation in 2007
In Millions of Inflation-Adjusted 2007 Dollars
September 20, 2012
Boston CBSA
Age of Head of Household
Households
Percent of HH
Cum %
Nation
Under Age 30
210,942
12.24%
100.00%
Mean NW
per HH
$39,082
30 to 39 years
300,153
17.42%
87.76%
40 to 49 years
383,910
22.28%
50 to 59 years
357,035
60 to 69 years
Households
Percent of HH
Cum %
Average NW
per HH
100.00%
$65,864
15,164,575
13.06%
$336,596
21,031,067
18.11%
86.94%
$187,601
70.34%
$604,588
25,005,248
21.53%
68.82%
$425,443
20.72%
48.06%
$994,403
22,022,510
18.96%
47.29%
$746,728
218,460
12.68%
27.34%
$1,380,651
15,247,839
13.13%
28.33%
$949,369
70 to 79 years
127,045
7.37%
14.67%
$1,253,425
9,685,828
8.34%
15.20%
$740,516
80 years or Older
125,664
7.29%
7.29%
$1,541,814
7,965,062
6.86%
6.86%
$558,584
1,723,209
100.00%
$784,018
116,122,126
100.00%
ALL
Source: Calculated at Center on Wealth and Philanthropy at Boston College based on CBSA Data and the CWP Wealth Transfer Microsimulation Model.
$500,549
Table 6: Average Household Net Worth by Age of Head for Boston CBSA and the Nation in 2008
In Millions of Inflation-Adjusted 2007 Dollars
September 20, 2012
Boston CBSA
Age of Head of Household
Households
Percent of HH
Cum %
Nation
Under Age 30
210,942
12.99%
100.00%
Mean NW
per HH
$28,204
30 to 39 years
300,153
15.92%
87.01%
40 to 49 years
383,910
22.25%
50 to 59 years
357,035
60 to 69 years
Households
Percent of HH
Cum %
Average NW
per HH
100.00%
$52,643
15,164,575
13.06%
$281,811
21,031,067
18.11%
86.94%
$148,303
71.09%
$529,718
25,005,248
21.53%
68.82%
$364,407
20.83%
48.84%
$883,829
22,022,510
18.96%
47.29%
$652,908
218,460
13.60%
28.01%
$1,273,465
15,247,839
13.13%
28.33%
$842,046
70 to 79 years
127,045
7.59%
14.40%
$1,113,750
9,685,828
8.34%
15.20%
$657,761
80 years or Older
125,664
6.81%
6.81%
$1,405,902
7,965,062
6.86%
6.86%
$505,961
1,723,209
100.00%
$699,756
116,122,126
100.00%
ALL
Source: Calculated at Center on Wealth and Philanthropy at Boston College based on CBSA Data and the CWP Wealth Transfer Microsimulation Model.
$436,165
Table 7: Average Household Net Worth by Age of Head for Boston CBSA and the Nation in 2009
In Millions of Inflation-Adjusted 2007 Dollars
September 20, 2012
Boston CBSA
Age of Head of Household
Households
Percent of HH
Cum %
Nation
Under Age 30
210,942
12.99%
100.00%
Mean NW
per HH
$21,584
30 to 39 years
300,153
15.92%
87.01%
40 to 49 years
383,910
22.25%
50 to 59 years
357,035
60 to 69 years
Households
Percent of HH
Cum %
Average NW
per HH
100.00%
$44,979
15,164,575
13.06%
$247,318
21,031,067
18.11%
86.94%
$125,453
71.09%
$481,226
25,005,248
21.53%
68.82%
$328,553
20.83%
48.84%
$812,326
22,022,510
18.96%
47.29%
$597,515
218,460
13.60%
28.01%
$1,203,149
15,247,839
13.13%
28.33%
$778,476
70 to 79 years
127,045
7.59%
14.40%
$1,023,276
9,685,828
8.34%
15.20%
$608,597
80 years or Older
125,664
6.81%
6.81%
$1,320,392
7,965,062
6.86%
6.86%
$474,639
1,723,209
100.00%
$645,499
116,122,126
100.00%
ALL
Source: Calculated at Center on Wealth and Philanthropy at Boston College based on CBSA Data and the CWP Wealth Transfer Microsimulation Model.
$398,203
Table 8: Average Household Net Worth by Age of Head for Boston CBSA and the Nation in 2010
In Millions of Inflation-Adjusted 2007 Dollars
September 20, 2012
Boston CBSA
Age of Head of Household
Households
Percent of HH
Cum %
Nation
Under Age 30
210,942
12.99%
100.00%
Mean NW
per HH
$25,243
30 to 39 years
300,153
15.92%
87.01%
40 to 49 years
383,910
22.25%
50 to 59 years
357,035
60 to 69 years
Households
Percent of HH
Cum %
Average NW
per HH
100.00%
$47,931
15,164,575
13.06%
$264,077
21,031,067
18.11%
86.94%
$134,737
71.09%
$513,506
25,005,248
21.53%
68.82%
$346,479
20.83%
48.84%
$864,699
22,022,510
18.96%
47.29%
$627,245
218,460
13.60%
28.01%
$1,213,633
15,247,839
13.13%
28.33%
$813,736
70 to 79 years
127,045
7.59%
14.40%
$1,066,275
9,685,828
8.34%
15.20%
$637,684
80 years or Older
125,664
6.81%
6.81%
$1,396,004
7,965,062
6.86%
6.86%
$491,237
1,723,209
100.00%
$676,922
116,122,126
100.00%
ALL
Source: Calculated at Center on Wealth and Philanthropy at Boston College based on CBSA Data and the CWP Wealth Transfer Microsimulation Model.
$417,963
Table 9: Aggregate Household Net Worth by Age of Head for Boston CBSA and the Nation in 2007
In Millions of Inflation-Adjusted 2007 Dollars
September 20, 2012
Boston CBSA
Age of Head of Household
Nation
Under Age 30
Aggregate NW
Percent of
(Millions)
Aggregate NW
210,942
$8,244
1.24%
30 to 39 years
300,153
$101,030
5.42%
98.75%
21,031,067
$3,945,442
6.79%
98.28%
40 to 49 years
383,910
$232,107
19.02%
93.33%
25,005,248
$10,638,303
18.30%
91.49%
50 to 59 years
357,035
$355,037
32.95%
74.30%
22,022,510
$16,444,816
28.29%
73.19%
60 to 69 years
218,460
$301,617
26.66%
41.36%
15,247,839
$14,475,832
24.90%
44.89%
70 to 79 years
127,045
$159,241
10.87%
14.70%
9,685,828
$7,172,514
12.34%
19.99%
80 years or Older
125,664
$193,750
3.83%
3.83%
7,965,062
$4,449,156
7.65%
7.65%
1,723,209
$1,351,027
100.00%
116,122,126
$58,124,869
100.00%
ALL
Households
Cum %
100.00%
Households
Aggregate NW
Percent of
(Millions)
Aggregate NW
15,164,575
$998,806
1.72%
Source: Calculated at Center on Wealth and Philanthropy at Boston College based on CBSA Data and the CWP Wealth Transfer Microsimulation Model.
Cum %
100.00%
Table 10: Aggregate Household Net Worth by Age of Head for Boston CBSA and the Nation in 2008
In Millions of Inflation-Adjusted 2007 Dollars
September 20, 2012
Boston CBSA
Age of Head of Household
Nation
Under Age 30
Aggregate NW
Percent of
(Millions)
Aggregate NW
210,942
$5,949
1.16%
30 to 39 years
300,153
$84,587
4.99%
98.83%
21,031,067
$3,118,973
6.16%
98.42%
40 to 49 years
383,910
$203,364
18.66%
93.84%
25,005,248
$9,112,077
17.99%
92.27%
50 to 59 years
357,035
$315,558
33.07%
75.18%
22,022,510
$14,378,680
28.39%
74.27%
60 to 69 years
218,460
$278,201
27.11%
42.12%
15,247,839
$12,839,374
25.35%
45.89%
70 to 79 years
127,045
$141,496
11.05%
15.01%
9,685,828
$6,370,962
12.58%
20.54%
80 years or Older
125,664
$176,671
3.96%
3.96%
7,965,062
$4,030,014
7.96%
7.96%
1,723,209
$1,205,826
100.00%
116,122,126
$50,648,385
100.00%
ALL
Households
Cum %
100.00%
Households
Aggregate NW
Percent of
(Millions)
Aggregate NW
15,164,575
$798,304
1.58%
Source: Calculated at Center on Wealth and Philanthropy at Boston College based on CBSA Data and the CWP Wealth Transfer Microsimulation Model.
Cum %
100.00%
Table 11: Aggregate Household Net Worth by Age of Head for Boston CBSA and the Nation in 2009
In Millions of Inflation-Adjusted 2007 Dollars
September 20, 2012
Boston CBSA
Age of Head of Household
Nation
Under Age 30
Aggregate NW
Percent of
(Millions)
Aggregate NW
210,942
$4,553
1.09%
30 to 39 years
300,153
$74,233
4.69%
98.90%
21,031,067
$2,638,415
5.71%
98.52%
40 to 49 years
383,910
$184,748
18.41%
94.21%
25,005,248
$8,215,550
17.77%
92.82%
50 to 59 years
357,035
$290,029
33.13%
75.80%
22,022,510
$13,158,772
28.46%
75.05%
60 to 69 years
218,460
$262,840
27.41%
42.68%
15,247,839
$11,870,071
25.67%
46.59%
70 to 79 years
127,045
$130,002
11.21%
15.26%
9,685,828
$5,894,762
12.75%
20.92%
80 years or Older
125,664
$165,926
4.06%
4.06%
7,965,062
$3,780,532
8.18%
8.18%
1,723,209
$1,112,330
100.00%
116,122,126
$46,240,185
100.00%
ALL
Households
Cum %
100.00%
Households
Aggregate NW
Percent of
(Millions)
Aggregate NW
15,164,575
$682,085
1.48%
Source: Calculated at Center on Wealth and Philanthropy at Boston College based on CBSA Data and the CWP Wealth Transfer Microsimulation Model.
Cum %
100.00%
Table 12: Aggregate Household Net Worth by Age of Head for Boston CBSA and the Nation in 2010
In Millions of Inflation-Adjusted 2007 Dollars
September 20, 2012
Boston CBSA
Age of Head of Household
Nation
Under Age 30
Aggregate NW
Percent of
(Millions)
Aggregate NW
210,942
$5,325
1.10%
30 to 39 years
300,153
$79,264
4.73%
98.89%
21,031,067
$2,833,661
5.84%
98.50%
40 to 49 years
383,910
$197,140
18.49%
94.16%
25,005,248
$8,663,805
17.85%
92.66%
50 to 59 years
357,035
$308,728
33.18%
75.67%
22,022,510
$13,813,503
28.46%
74.81%
60 to 69 years
218,460
$265,130
27.30%
42.50%
15,247,839
$12,407,713
25.56%
46.35%
70 to 79 years
127,045
$135,465
11.18%
15.21%
9,685,828
$6,176,493
12.73%
20.79%
80 years or Older
125,664
$175,427
4.02%
4.02%
7,965,062
$3,912,736
8.06%
8.06%
1,723,209
$1,166,479
100.00%
116,122,126
$48,534,756
100.00%
ALL
Households
Cum %
100.00%
Households
Aggregate NW
Percent of
(Millions)
Aggregate NW
15,164,575
$726,847
1.50%
Source: Calculated at Center on Wealth and Philanthropy at Boston College based on CBSA Data and the CWP Wealth Transfer Microsimulation Model.
Cum %
100.00%
Table 13: Approximate Boston Metropolitan Area Wealth Transfer Summary Table
20-Year Period (2007 through 2026)
In Billions of Inflation-Adjusted 2007 Dollars
October 31, 2012
Number of Final Estates
359,578
1% Growth Scenario
$1 M
$5 M
Exemption Exemption
after 2012 after 2012
2% Growth Scenario
$1 M
$5 M
Exemption Exemption
after 2012 after 2012
3% Growth Scenario
$1 M
$5 M
Exemption Exemption
after 2012 after 2012
4% Growth Scenario
$1 M
$5 M
Exemption Exemption
after 2012 after 2012
$ 459.84
$ 461.19
$ 546.92
$ 548.68
$ 663.25
$ 665.89
$ 801.02
$ 804.59
$ 407.19
$ 408.22
$ 461.51
$ 463.04
$ 527.91
$ 529.82
$ 600.13
$ 602.57
Accelerated Lifetime Giving
$
7.14
$
7.21
$
8.94
$
9.04
$
11.23
$
11.36
$
14.04
$
14.23
Other Lifetime Transfers
$
33.98
$
34.29
$
42.45
$
43.03
$
56.53
$
57.22
$
72.68
$
73.55
Value of Final Estates
$
366.07
$
366.73
$
410.12
$
410.96
$
460.15
$
461.25
$
513.40
$
514.78
Massachusetts Estate Tax Liability
Federal Estate Tax Liability
Charitable Bequests
Bequests to Heirs
Estate Closing Fees
$
$
$
$
$
21.16
73.10
82.24
182.55
7.03
$
$
$
$
$
21.20
40.84
93.08
204.43
7.17
$
$
$
$
$
23.76
84.02
89.99
204.45
7.91
$
$
$
$
$
23.81
44.58
102.82
231.69
8.06
$
$
$
$
$
27.39
98.29
100.55
225.12
8.80
$
$
$
$
$
27.47
50.50
115.97
258.35
8.96
$
$
$
$
$
31.78
114.89
113.37
243.70
9.66
$
$
$
$
$
31.89
58.03
131.88
283.16
9.82
Potential for Charity
Baseline Lifetime Giving Trend $
Accelerated Lifetime Giving $
Total Lifetime Giving
$
78.57
7.14
85.72
$
$
$
78.57
7.21
85.78
$
$
$
83.38
8.94
92.32
$
$
$
83.38
9.04
92.42
$
$
$
88.62
11.23
99.85
$
$
$
88.62
11.36
99.98
$
$
$
94.34
14.04
108.39
$
$
$
94.34
14.23
108.57
Charitable Bequests $
82.24
$
93.08
$
89.99
$
102.82
$
100.55
$
115.97
$
113.37
$
131.88
Total Wealth Transfer
(Unadjusted for Recession)
Total Wealth Transfer
(Adjusted for Recession)
Potential Total to Charity
$ 167.95
$ 178.86
$ 182.31
$ 195.25
$ 200.40
$ 215.94
$ 221.76
Source: Calculated at Center on Wealth and Philanthropy at Boston College based on CBSA Data and the CWP Wealth Transfer Microsimulation Model.
$ 240.45
Table 14: Approximate Boston Metropolitan Area Wealth Transfer Summary Table
55-Year Period (2007 through 2061)
In Billions of Inflation-Adjusted 2007 Dollars
October 31, 2012
1,421,598
Number of Final Estates
1% Growth Scenario
$1 M
$5 M
Exemption
Exemption
after 2012
after 2012
Total Wealth Transfer
(Unadjusted for Recession)
Total Wealth Transfer
(Adjusted for Recession)
2% Growth Scenario
$1 M
$5 M
Exemption
Exemption
after 2012
after 2012
3% Growth Scenario
$1 M
$5 M
Exemption
Exemption
after 2012
after 2012
4% Growth Scenario
$1 M
$5 M
Exemption
Exemption
after 2012
after 2012
$
1,114.86
$
1,142.54
$
1,808.00
$
1,865.04
$
3,142.99
$
3,259.32
$
5,559.89
$
5,789.95
$
949.77
$
972.90
$
1,467.31
$
1,515.79
$
2,348.58
$
2,441.30
$
3,825.86
$
3,993.84
Accelerated Lifetime Giving
$
24.47
$
25.83
$
43.57
$
46.15
$
74.20
$
79.07
$
124.13
$
132.04
Other Lifetime Transfers
$
97.79
$
104.44
$
165.27
$
179.35
$
290.92
$
314.65
$
495.25
$
541.66
Value of Final Estates
$
827.50
$
842.63
$
1,258.46
$
1,290.29
$
1,983.46
$
2,047.58
$
3,206.48
$
3,320.14
Massachusetts Estate Tax Liability
Federal Estate Tax Liability
Charitable Bequests
Bequests to Heirs
Estate Closing Fees
$
$
$
$
$
36.09
165.66
121.62
486.59
17.53
$
$
$
$
$
36.88
50.50
148.53
588.77
17.96
$
$
$
$
$
58.91
288.90
175.18
709.35
26.13
$
$
$
$
$
60.94
72.15
227.58
902.78
26.84
$
$
$
$
$
106.37
523.85
321.99
992.59
38.67
$
$
$
$
$
111.06
130.66
441.26
1,324.73
39.87
$
$
$
$
$
200.39
933.66
629.20
1,384.85
58.37
$
$
$
$
$
209.72
269.78
870.18
1,910.11
60.36
Potential for Charity
Baseline Lifetime Giving Trend $
Accelerated Lifetime Giving $
Total Lifetime Giving
$
272.80
24.47
297.27
$
$
$
272.80
25.83
298.63
$
$
$
353.58
43.57
397.15
$
$
$
353.58
46.15
399.72
$
$
$
466.89
74.20
541.09
$
$
$
466.89
79.07
545.96
$
$
$
626.99
124.13
751.12
$
$
$
626.99
132.04
759.03
$
121.62
$
148.53
$
175.18
$
227.58
$
321.99
$
441.26
$
629.20
$
870.18
$
418.89
$
447.15
$
572.33
$
627.30
$
863.07
$
987.22
$
1,380.33
$
1,629.22
Charitable Bequests
Potential Total to Charity
Source: Calculated at Center on Wealth and Philanthropy at Boston College based on Federal Data and the CWP Wealth Transfer Microsimulation Model.
Table 15: Boston CBSA Final Estates by Net Worth
1% Growth Scenario
$1 Million Exemption - Current Law
Adjusted for Recession
In Millions of Inflation - Adjusted 2007 Dollars
October 31, 2012
2007-2026
Number of Estates
Value of Estates
Neg or Zero
16,907
$
(415)
4.70%
-0.11%
$1 to $.9M
303,055
$
100.00%
Estate Fees
$
13
$
-
0.19%
$
$
-
0.00%
$
$
-
0.00%
$
$
-
27.05%
$
-
0.00%
$
3,237
0.00%
$
0.00%
$
58,936
$
1,466
1,005
0.00%
$
7,584
20.86%
$
$
3,090
4.75%
$
32.29%
$
47,981
$
357
1,123
10.38%
$
6,707
5.08%
$
$
1,398
5.31%
$
26.28%
$
9,031
$
140
626
9.17%
$
2,891
1.99%
$
$
780
2.96%
$
4.95%
$
3,003
$
3,150
18,401
3.95%
$
55,920
44.83%
$
$
73,732
86.98%
$
1.64%
$
63,598
366,069
100.00%
7,026
100.00%
21,156
100.00%
5.78%
76.50%
$
73,102
100.00%
19.97%
89.66%
$
34.33%
40.37%
100.00%
1.92%
26.03%
0.95%
359,578
100.00%
8.57%
10.48%
48.51%
58.68%
1.47%
38.86%
1.70%
214,801
Total
0.97%
100.00%
8.41%
7.51%
78.49%
2.03%
1.88%
36.03%
3.76%
7,439
100.00%
6.03%
5.06%
91.98%
5.09%
$10M to $19.9M
$20M or more
562 0.16%
3,498
1.92%
12.41%
3.94%
18,617
0.73%
100.00%
1.64%
170.30%
0.00%
16.70%
$5M to $9.9M
2,627
2.40%
0.00%
0.00%
Bequest to Heirs
1,901
61,126
9.16%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.97%
0.00%
Fed. Est. Tax Receipts
17.50%
$1M to $4.9M
32,929
100.00%
-3.18%
Boston CBSA Tax Receipts
64,072
84.28%
82,237
100.00%
22.46%
34.84%
$
29.61%
182,549
100.00%
49.87%
2007-2061
Number of Estates
Value of Estates
Neg or Zero
103,977
$
(5,842)
7.31%
-0.71%
$1 to $.9M
1,174,414
$
100.00%
Estate Fees
$
37
$
-
0.21%
$
$
-
0.00%
$
$
-
0.00%
$
$
0.00%
30.71%
$
-
0.00%
$
9,172
0.00%
$
$
166,940
91.98%
$
5,460
4,366
0.00%
$
38,408
31.15%
$
$
11,974
12.10%
$
$
178,698
74.80%
$
1,925
5,942
23.18%
$
38,221
10.98%
$
$
7,316
16.46%
$
$
46,529
46.56%
$
872
3,745
23.07%
$
18,800
4.97%
$
$
4,706
10.38%
$
$
18,127
39.19%
$
3,852
22,039
11.35%
$
70,233
21.98%
$
$
88,455
61.06%
$
$
76,298
29.25%
17,529
100.00%
36,092
100.00%
4.36%
42.40%
$
165,661
100.00%
20.02%
72.73%
$
33.91%
3.73%
100.00%
2.12%
26.92%
3.87%
827,499
100.00%
100.00%
8.45%
10.18%
9.56%
31.53%
Total
1,421,598
1.48%
40.65%
6.02%
260,878
0.33%
100.00%
8.10%
7.32%
36.72%
5.59%
1.88%
38.25%
9.84%
46,251
100.00%
5.95%
5.01%
34.31%
12.08%
$10M to $19.9M
$20M or more
3,726 0.26%
4,696
1.93%
16.08%
7.54%
99,933
1.01%
100.00%
1.83%
5.05%
0.00%
28.87%
$5M to $9.9M
14,403
2.29%
0.00%
0.00%
Bequest to Heirs
5,382
238,907
8.47%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.97%
0.00%
Fed. Est. Tax Receipts
21.93%
$1M to $4.9M
120,381
100.00%
-0.63%
Boston CBSA Tax Receipts
181,493
82.61%
121,624
100.00%
14.70%
15.68%
$
486,593
58.80%
Source: Calculated at the Center of Wealth and Philanthropy at Boston College using the 2011 version of the Wealth Transfer Microsimulation Model based primarily on CBSA data.
100.00%
Table 16: Boston CBSA Final Estates by Net Worth
1% Growth Scenario
$5 Million Exemption - Not Current Law
Adjusted for Recession
In Millions of Inflation - Adjusted 2007 Dollars
October 31, 2012
2007-2026
Number of Estates
Value of Estates
Neg or Zero
16,906
$
(415)
4.70%
-0.11%
$1 to $.9M
302,939
$
100.00%
Estate Fees
$
13
$
-
0.18%
$
$
-
0.00%
$
$
-
0.00%
$
$
-
26.51%
$
-
0.00%
$
3,237
0.00%
$
0.00%
$
58,948
$
1,475
1,008
0.00%
$
187
20.56%
$
$
3,661
4.75%
$
28.83%
$
54,990
$
360
1,128
0.46%
$
335
5.03%
$
$
2,268
5.32%
$
26.90%
$
14,588
$
141
630
0.82%
$
481
1.97%
$
$
1,283
2.97%
$
7.14%
$
4,942
$
3,281
18,435
1.18%
$
39,835
45.75%
$
$
82,634
86.96%
$
2.42%
$
70,966
366,727
100.00%
7,171
100.00%
21,200
100.00%
5.78%
97.54%
$
40,838
100.00%
11.14%
88.77%
$
38.41%
66.09%
100.00%
1.96%
18.51%
1.38%
359,578
100.00%
8.57%
17.16%
78.10%
58.67%
1.53%
6.44%
2.44%
215,151
Total
0.97%
100.00%
8.42%
12.14%
89.68%
2.04%
1.89%
1.80%
3.93%
7,477
100.00%
6.04%
5.97%
91.98%
5.09%
$10M to $19.9M
$20M or more
564 0.16%
3,499
1.93%
0.30%
3.48%
18,680
0.73%
100.00%
1.64%
5.05%
0.00%
16.72%
$5M to $9.9M
2,633
2.40%
0.00%
0.00%
Bequest to Heirs
1,901
61,321
9.19%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.97%
0.00%
Fed. Est. Tax Receipts
17.47%
$1M to $4.9M
33,037
100.00%
-3.18%
Boston CBSA Tax Receipts
64,084
84.25%
93,084
100.00%
25.38%
34.71%
$
32.98%
204,433
100.00%
55.75%
2007-2061
Number of Estates
Value of Estates
Neg or Zero
103,977
$
(5,841)
7.31%
-0.69%
$1 to $.9M
1,171,819
$
100.00%
Estate Fees
$
37
$
-
0.20%
$
$
-
0.00%
$
$
-
0.00%
$
$
0.00%
30.16%
$
-
0.00%
$
9,230
0.00%
$
$
168,007
91.98%
$
5,529
4,417
0.00%
$
187
30.79%
$
$
15,086
11.98%
$
$
216,685
89.57%
$
2,058
6,356
0.37%
$
1,453
11.46%
$
$
13,218
17.23%
$
$
83,648
78.37%
$
892
3,825
2.88%
$
1,791
4.97%
$
$
8,498
10.37%
$
$
32,356
68.32%
$
4,026
22,283
3.55%
$
47,072
22.42%
$
$
102,494
60.42%
$
$
88,070
33.37%
17,959
100.00%
36,881
100.00%
4.38%
93.21%
$
50,503
100.00%
5.99%
69.01%
$
38.83%
5.50%
100.00%
2.13%
17.83%
5.72%
842,635
100.00%
100.00%
8.44%
17.94%
14.21%
31.32%
Total
1,421,598
1.53%
3.78%
8.90%
263,945
0.34%
100.00%
8.08%
12.38%
36.80%
5.62%
1.88%
1.36%
10.16%
47,362
100.00%
5.95%
6.24%
28.54%
12.67%
$10M to $19.9M
$20M or more
3,814 0.27%
4,778
1.93%
0.08%
6.21%
106,733
1.08%
100.00%
1.83%
5.05%
0.00%
28.71%
$5M to $9.9M
15,334
2.29%
0.00%
0.00%
Bequest to Heirs
5,417
241,903
8.57%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.97%
0.00%
Fed. Est. Tax Receipts
21.68%
$1M to $4.9M
121,876
100.00%
-0.63%
Boston CBSA Tax Receipts
182,653
82.43%
148,526
100.00%
17.63%
14.96%
$
588,766
69.87%
Source: Calculated at the Center of Wealth and Philanthropy at Boston College using the 2011 version of the Wealth Transfer Microsimulation Model based primarily on CBSA data.
100.00%
Table 17: Boston CBSA Final Estates by Net Worth
2% Growth Scenario
$1 Million Exemption - Current Law
Adjusted for Recesion
In Millions of Inflation - Adjusted 2007 Dollars
October 31, 2012
2007-2026
Number of Estates
Value of Estates
Neg or Zero
16,520
$
(312)
4.59%
-0.08%
$1 to $.9M
296,276
$
100.00%
Estate Fees
$
16
$
-
0.21%
$
$
0.00%
-
$
$
0.00%
-
$
$
0.00%
-
25.78%
$
-
$
3,471
0.00%
$
0.00%
$
63,205
$
1,717
1,114
0.00%
$
8,727
21.71%
$
$
3,573
4.69%
$
30.92%
$
55,837
$
465
1,432
10.39%
$
8,910
5.88%
$
$
1,832
6.03%
$
27.31%
$
11,582
$
237
1,040
10.61%
$
4,986
2.99%
$
$
1,348
4.38%
$
5.67%
$
5,017
$
3,435
20,170
5.93%
$
61,392
43.43%
$
$
79,768
84.90%
$
2.45%
$
68,805
410,120
100.00%
7,909
100.00%
23,756
100.00%
5.79%
73.07%
$
84,016
100.00%
20.49%
88.64%
$
34.15%
39.73%
100.00%
1.93%
26.28%
1.50%
359,578
100.00%
8.64%
10.67%
47.82%
56.95%
1.47%
39.48%
2.04%
233,570
Total
0.99%
100.00%
8.24%
7.56%
78.68%
3.08%
1.87%
36.79%
3.97%
12,628
100.00%
5.91%
5.03%
91.98%
5.91%
$10M to $19.9M
$20M or more
976
0.27%
3,573
1.92%
12.30%
3.86%
24,221
0.98%
100.00%
1.57%
5.05%
0.00%
17.30%
$5M to $9.9M
3,515
2.42%
0.00%
0.00%
Bequest to Heirs
2,039
70,969
10.77%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.97%
0.00%
Fed. Est. Tax Receipts
16.75%
$1M to $4.9M
38,718
100.00%
-5.26%
Boston CBSA Tax Receipts
68,713
82.40%
89,992
100.00%
21.94%
33.65%
$
29.46%
204,447
100.00%
49.85%
2007-2061
Number of Estates
Value of Estates
Neg or Zero
97,003
$
(3,734)
6.82%
-0.30%
$1 to $.9M
1,111,317
$
100.00%
Estate Fees
$
75
$
-
0.29%
$
$
-
0.00%
$
$
-
0.00%
$
$
0.00%
25.74%
$
-
0.00%
$
11,472
0.00%
$
$
208,653
91.98%
$
8,119
7,128
0.00%
$
67,243
31.08%
$
$
18,781
12.10%
$
$
265,265
72.37%
$
3,160
9,722
23.28%
$
63,328
12.09%
$
$
12,142
16.50%
$
$
75,716
46.15%
$
2,895
12,940
21.92%
$
61,921
11.08%
$
$
17,050
21.96%
$
$
59,879
38.71%
100.00%
27.51%
$ 1,258,464
100.00%
5,153
100.00%
19.73%
$
29,124
21.43%
$
96,405
49.44%
$
$
115,735
33.37%
$
$
99,833
28.83%
58,914
100.00%
288,897
100.00%
22.96%
66.07%
$
33.43%
8.44%
100.00%
4.68%
27.84%
9.73%
26,126
2.08%
8.41%
11.02%
10.67%
Total
1,421,598
1.49%
40.03%
6.93%
346,251
0.45%
100.00%
8.37%
7.40%
37.40%
12.29%
1.87%
38.60%
10.72%
154,685
100.00%
5.93%
5.12%
29.41%
13.04%
$10M to $19.9M
$20M or more
11,401
0.80%
6,416
1.93%
18.35%
6.55%
164,068
1.66%
100.00%
1.94%
5.06%
0.00%
29.13%
$5M to $9.9M
23,630
2.22%
0.00%
0.00%
Bequest to Heirs
6,724
366,536
12.09%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.96%
0.00%
Fed. Est. Tax Receipts
18.03%
$1M to $4.9M
171,830
100.00%
-2.00%
Boston CBSA Tax Receipts
226,848
78.17%
175,181
100.00%
13.92%
14.07%
$
709,345
56.37%
Source: Calculated at the Center of Wealth and Philanthropy at Boston College using the 2011 version of the Wealth Transfer Microsimulation Model based primarily on CBSA data.
100.00%
Table 18: Boston CBSA Final Estates by Net Worth
2% Growth Scenario
$5 Million Exemption - Not Current Law
Adjusted for Recession
In Millions of Inflation - Adjusted 2007 Dollars
October 31, 2012
2007-2026
Number of Estates
Value of Estates
Neg or Zero
16,519
$
(311)
4.59%
-0.08%
$1 to $.9M
296,119
$
100.00%
Estate Fees
$
16
$
-
0.20%
$
$
-
0.00%
$
$
-
0.00%
$
$
-
25.30%
$
-
0.00%
$
3,471
0.00%
$
0.00%
$
63,190
$
1,726
1,116
0.00%
$
187
21.42%
$
$
4,218
4.68%
$
27.27%
$
63,914
$
466
1,427
0.42%
$
441
5.79%
$
$
3,001
5.99%
$
27.59%
$
18,849
$
242
1,057
0.99%
$
666
3.00%
$
$
2,301
4.44%
$
8.14%
$
8,593
$
3,569
20,214
1.49%
$
43,286
44.29%
$
$
89,831
84.88%
$
3.71%
$
77,142
410,961
100.00%
8,058
100.00%
23,813
100.00%
5.79%
97.10%
$
44,580
100.00%
10.85%
87.37%
$
38.38%
66.83%
100.00%
1.96%
18.49%
2.24%
359,578
100.00%
8.64%
17.89%
77.94%
56.95%
1.53%
5.18%
2.92%
234,042
Total
0.99%
100.00%
8.22%
12.41%
89.82%
3.13%
1.88%
1.82%
4.10%
12,859
100.00%
5.90%
5.93%
91.98%
5.88%
$10M to $19.9M
$20M or more
998 0.28%
3,575
1.93%
0.26%
3.38%
24,185
0.98%
100.00%
1.57%
5.05%
0.00%
17.32%
$5M to $9.9M
3,518
2.43%
0.00%
0.00%
Bequest to Heirs
2,039
71,160
10.80%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.97%
0.00%
Fed. Est. Tax Receipts
16.72%
$1M to $4.9M
38,848
100.00%
-5.26%
Boston CBSA Tax Receipts
68,697
82.35%
102,822
100.00%
25.02%
33.30%
$
32.96%
231,688
100.00%
56.38%
2007-2061
Number of Estates
Value of Estates
Neg or Zero
96,996
$
(3,733)
6.82%
-0.29%
$1 to $.9M
1,104,882
$
100.00%
Estate Fees
$
75
$
-
0.28%
$
$
-
0.00%
$
$
-
0.00%
$
$
0.00%
24.82%
$
-
0.00%
$
11,366
0.00%
$
$
206,737
91.98%
$
8,379
7,391
0.00%
$
187
31.22%
$
$
25,006
12.13%
$
$
337,436
89.17%
$
3,234
9,937
0.26%
$
1,300
12.05%
$
$
21,226
16.31%
$
$
132,080
78.72%
$
3,093
13,853
1.80%
$
11,602
11.52%
$
$
30,224
22.73%
$
$
106,466
64.43%
100.00%
27.44%
$ 1,290,290
100.00%
5,399
100.00%
20.11%
$
29,763
16.08%
$
59,058
48.84%
$
$
139,755
81.86%
$
$
120,060
33.91%
60,945
100.00%
72,148
100.00%
5.59%
61.41%
$
39.47%
11.79%
100.00%
4.72%
16.68%
13.28%
26,842
2.08%
8.41%
18.29%
14.63%
Total
1,421,598
1.53%
7.02%
9.33%
354,036
0.46%
100.00%
8.38%
12.65%
37.38%
12.81%
1.87%
0.78%
10.99%
165,237
100.00%
5.92%
6.61%
22.90%
13.00%
$10M to $19.9M
$20M or more
12,124 0.85%
6,585
1.93%
0.05%
4.99%
167,777
1.70%
100.00%
1.95%
5.06%
0.00%
29.33%
$5M to $9.9M
24,198
2.21%
0.00%
0.00%
Bequest to Heirs
6,662
378,399
12.44%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.96%
0.00%
Fed. Est. Tax Receipts
17.42%
$1M to $4.9M
176,813
100.00%
-2.01%
Boston CBSA Tax Receipts
224,764
77.72%
227,576
100.00%
17.64%
13.30%
$
902,779
69.97%
Source: Calculated at the Center of Wealth and Philanthropy at Boston College using the 2011 version of the Wealth Transfer Microsimulation Model based primarily on CBSA data.
100.00%
Table 19: Boston CBSA Final Estates by Net Worth
3% Growth Scenario
$1 Million Exemption - Current Law
Adjusted for Recession
In Millions of Inflation - Adjusted 2007 Dollars
October 31, 2012
2007-2026
Number of Estates
Value of Estates
Neg or Zero
14,668
$
(220)
4.08%
-0.05%
$1 to $.9M
294,879
$
100.00%
Estate Fees
$
11
$
-
0.13%
$
$
-
0.00%
$
$
-
0.00%
$
$
-
24.24%
$
-
0.00%
$
3,636
0.00%
$
0.00%
$
66,176
$
1,895
1,343
0.00%
$
10,585
21.52%
$
$
3,997
4.90%
$
29.40%
$
61,394
$
518
1,586
10.77%
$
10,007
5.89%
$
$
2,055
5.79%
$
27.27%
$
12,835
$
398
1,760
10.18%
$
8,441
4.52%
$
$
2,322
6.42%
$
5.70%
$
8,342
$
3,848
22,706
8.59%
$
69,258
43.70%
$
$
88,537
82.89%
$
3.71%
$
76,369
460,153
100.00%
8,804
100.00%
27,394
100.00%
5.95%
70.46%
$
98,292
100.00%
21.36%
88.06%
$
33.96%
39.23%
100.00%
1.91%
26.56%
2.31%
359,578
100.00%
8.71%
10.92%
47.54%
56.66%
1.48%
39.70%
2.04%
260,718
Total
1.03%
100.00%
8.28%
7.61%
77.50%
4.62%
1.87%
37.06%
3.98%
21,263
100.00%
5.87%
5.05%
91.98%
5.87%
$10M to $19.9M
$20M or more
1,610
0.45%
3,711
1.92%
13.36%
3.62%
27,001
1.09%
100.00%
1.69%
5.05%
0.00%
17.21%
$5M to $9.9M
3,931
2.39%
0.00%
0.00%
Bequest to Heirs
2,135
79,213
11.34%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.97%
0.00%
Fed. Est. Tax Receipts
15.63%
$1M to $4.9M
40,779
100.00%
-5.08%
Boston CBSA Tax Receipts
71,944
82.01%
100,547
100.00%
21.85%
33.92%
$
29.29%
225,116
100.00%
48.92%
2007-2061
Number of Estates
Value of Estates
Neg or Zero
69,971
$
(1,761)
4.92%
-0.09%
$1 to $.9M
1,078,152
$
100.00%
Estate Fees
$
46
$
-
0.12%
$
$
-
0.00%
$
$
-
0.00%
$
$
0.00%
19.85%
$
-
0.00%
$
13,174
0.00%
$
$
239,157
91.98%
$
10,127
11,110
0.00%
$
104,021
26.19%
$
$
25,550
10.44%
$
$
327,969
68.50%
$
5,512
16,635
19.86%
$
112,208
14.26%
$
$
21,993
15.64%
$
$
130,388
45.47%
$
4,681
20,948
21.42%
$
99,922
12.11%
$
$
30,830
19.69%
$
$
96,296
38.11%
100.00%
35.55%
$ 1,983,459
100.00%
10,626
100.00%
27.48%
$
57,682
19.07%
$
207,694
54.22%
$
$
230,439
39.65%
$
$
198,777
28.19%
106,375
100.00%
523,845
100.00%
26.41%
71.57%
$
32.68%
9.70%
100.00%
5.36%
29.45%
9.57%
38,667
1.95%
8.18%
12.20%
13.14%
Total
1,421,598
1.51%
39.55%
6.83%
705,218
1.09%
100.00%
8.29%
7.67%
33.04%
12.74%
1.85%
39.13%
7.94%
252,678
100.00%
5.80%
5.34%
24.09%
14.46%
$10M to $19.9M
$20M or more
18,135
1.28%
15,429
1.92%
21.73%
4.09%
286,736
2.96%
100.00%
2.32%
5.07%
0.00%
24.14%
$5M to $9.9M
42,083
2.12%
0.00%
0.00%
Bequest to Heirs
7,674
478,777
13.92%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.95%
0.00%
Fed. Est. Tax Receipts
13.11%
$1M to $4.9M
197,829
100.00%
-2.60%
Boston CBSA Tax Receipts
260,003
75.84%
321,986
100.00%
16.23%
20.03%
$
992,586
50.04%
Source: Calculated at the Center of Wealth and Philanthropy at Boston College using the 2011 version of the Wealth Transfer Microsimulation Model based primarily on CBSA data.
100.00%
Table 20: Boston CBSA Final Estates by Net Worth
3% Growth Scenario
$5 Million Exemption - Not Current Law
Adjusted for Recession
In Millions of Inflation - Adjusted 2007 Dollars
October 31, 2012
2007-2026
Number of Estates
Value of Estates
Neg or Zero
14,664
$
(219)
4.08%
-0.05%
$1 to $.9M
294,705
$
100.00%
Estate Fees
$
11
$
-
0.12%
$
$
-
0.00%
$
$
-
0.00%
$
$
-
23.81%
$
-
0.00%
$
3,633
0.00%
$
0.00%
$
66,140
$
1,905
1,346
0.00%
$
187
21.27%
$
$
4,806
4.90%
$
25.60%
$
71,243
$
524
1,596
0.37%
$
843
5.84%
$
$
3,366
5.81%
$
27.58%
$
20,842
$
400
1,764
1.67%
$
1,248
4.46%
$
$
3,876
6.42%
$
8.07%
$
14,011
$
3,986
22,766
2.47%
$
48,217
44.49%
$
$
100,286
82.87%
$
5.42%
$
86,118
461,248
100.00%
8,959
100.00%
27,473
100.00%
5.96%
95.49%
$
50,495
100.00%
10.95%
86.48%
$
38.37%
65.78%
100.00%
1.94%
18.45%
3.34%
359,578
100.00%
8.71%
18.20%
76.71%
56.67%
1.53%
5.86%
2.90%
261,373
Total
1.03%
100.00%
8.28%
12.39%
89.63%
4.62%
1.88%
3.10%
4.14%
21,299
100.00%
5.87%
6.05%
91.98%
5.89%
$10M to $19.9M
$20M or more
1,611 0.45%
3,715
1.93%
0.24%
3.13%
27,170
1.10%
100.00%
1.69%
5.05%
0.00%
17.23%
$5M to $9.9M
3,956
2.40%
0.00%
0.00%
Bequest to Heirs
2,133
79,488
11.38%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.97%
0.00%
Fed. Est. Tax Receipts
15.59%
$1M to $4.9M
40,927
100.00%
-5.09%
Boston CBSA Tax Receipts
71,905
81.96%
115,968
100.00%
25.14%
33.33%
$
32.95%
258,354
100.00%
56.01%
2007-2061
Number of Estates
Value of Estates
Neg or Zero
69,885
$
(1,758)
4.92%
-0.09%
$1 to $.9M
1,072,241
$
100.00%
Estate Fees
$
46
$
-
0.11%
$
$
-
0.00%
$
$
-
0.00%
$
$
0.00%
19.06%
$
-
0.00%
$
13,044
0.00%
$
$
236,813
91.98%
$
10,339
11,490
0.00%
$
187
25.93%
$
$
35,695
10.35%
$
$
431,767
88.21%
$
5,749
17,361
0.14%
$
4,597
14.42%
$
$
39,397
15.63%
$
$
231,823
77.55%
$
4,818
21,553
3.52%
$
16,909
12.09%
$
$
51,336
19.41%
$
$
165,026
63.56%
100.00%
36.24%
$ 2,047,578
100.00%
11,316
100.00%
28.38%
$
60,655
12.94%
$
108,972
54.61%
$
$
301,786
83.40%
$
259,300
34.94%
111,059
100.00%
$
130,665
100.00%
6.38%
68.39%
40.67%
12.46%
100.00%
5.42%
14.69%
11.63%
39,869
1.95%
8.17%
19.77%
17.50%
Total
1,421,598
1.53%
6.51%
8.93%
742,029
1.15%
100.00%
8.30%
13.18%
32.59%
12.68%
1.86%
1.54%
8.09%
259,641
100.00%
5.81%
7.29%
17.88%
14.60%
$10M to $19.9M
$20M or more
18,714 1.32%
16,294
1.92%
0.04%
2.96%
298,927
3.08%
100.00%
2.35%
5.07%
0.00%
23.91%
$5M to $9.9M
43,824
2.11%
0.00%
0.00%
Bequest to Heirs
7,600
489,479
14.11%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.95%
0.00%
Fed. Est. Tax Receipts
12.57%
$1M to $4.9M
200,639
100.00%
-2.60%
Boston CBSA Tax Receipts
257,454
75.43%
$
441,257
100.00%
21.55%
19.57%
$ 1,324,728
64.70%
Source: Calculated at the Center of Wealth and Philanthropy at Boston College using the 2011 version of the Wealth Transfer Microsimulation Model based primarily on CBSA data.
100.00%
Table 21: Boston CBSA Final Estates by Net Worth
4% Growth Scenario
$1 Million Exemption - Current Law
Adjusted for Recession
In Millions of Inflation - Adjusted 2007 Dollars
October 31, 2012
2007-2026
Number of Estates
Value of Estates
Neg or Zero
13,425
$
(188)
3.73%
-0.04%
$1 to $.9M
291,351
$
100.00%
Estate Fees
$
9
$
-
0.10%
$
$
-
0.00%
$
$
-
0.00%
$
$
-
21.28%
$
-
0.00%
$
3,502
0.00%
$
0.00%
$ 63,742.54
$
2,066
1,536
0.00%
$
12,177
21.38%
$
$
4,403
4.83%
$
26.16%
$
67,505
$
619
1,914
10.60%
$
11,998
6.40%
$
$
2,436
6.02%
$
27.70%
$
15,245
$
522
2,355
10.44%
$
11,028
5.40%
$
$
3,007
7.41%
$
6.26%
$
10,924
$
4,390
100.00%
513,400
100.00%
100.00%
45.44%
$
9,662
25,979
9.60%
$
79,684
81.74%
$
31,783
$
100,025
69.36%
$
4.48%
$
86,279
114,887
100.00%
22.38%
88.23%
$
33.75%
39.24%
100.00%
6.19%
26.89%
2.65%
100.00%
1.88%
8.77%
10.80%
47.33%
57.72%
359,578
1.48%
39.62%
2.15%
296,357
Total
1.11%
100.00%
8.46%
7.56%
76.98%
5.42%
$20M or more
3,974
1.87%
37.25%
3.88%
27,835
0.57%
100.00%
5.94%
5.02%
91.98%
6.27%
$10M to $19.9M
2,037
1.92%
13.89%
3.09%
32,211
1.29%
100.00%
1.75%
5.05%
0.00%
17.08%
$5M to $9.9M
4,626
2.36%
0.00%
0.00%
Bequest to Heirs
2,056
87,687
12.28%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.97%
0.00%
Fed. Est. Tax Receipts
13.50%
$1M to $4.9M
44,165
100.00%
-4.94%
Boston CBSA Tax Receipts
69,299
81.03%
113,372
100.00%
22.08%
35.40%
$
29.11%
243,696
100.00%
47.47%
2007-2061
Number of Estates
Value of Estates
Neg or Zero
59,290
$
(1,247)
4.17%
-0.04%
$1 to $.9M
1,004,799
$
100.00%
Estate Fees
$
37
$
-
0.06%
$
$
-
0.00%
$
$
-
0.00%
$
$
0.00%
11.82%
$
-
0.00%
$
11,938
0.00%
$
$
215,625
91.97%
$
12,163
14,226
0.00%
$
134,921
20.84%
$
$
31,972
7.10%
$
$
391,117
66.93%
$
8,478
25,977
14.45%
$
174,206
14.52%
$
$
35,259
12.96%
$
$
198,162
44.82%
$ 1,497,618
8,086
34,805
18.66%
$
173,928
13.85%
$
$
67,431
17.37%
$
$
163,635
36.54%
$
22,710
100.00%
3,206,484
100.00%
100.00%
38.90%
$
58,375
125,381
18.63%
$
450,610
62.57%
$
200,388
$
482,606
48.26%
$
$
416,313
27.80%
933,665
100.00%
29.12%
76.70%
$
32.22%
11.82%
100.00%
6.25%
30.09%
10.72%
100.00%
1.82%
8.37%
15.06%
14.31%
46.71%
1,421,598
1.52%
38.83%
5.60%
Total
2.01%
100.00%
7.77%
7.98%
28.24%
13.97%
$20M or more
28,603
1.81%
39.41%
5.08%
447,884
2.28%
100.00%
5.88%
5.47%
15.57%
13.79%
$10M to $19.9M
32,363
1.92%
23.09%
1.90%
442,082
4.44%
100.00%
2.43%
5.09%
0.00%
18.23%
$5M to $9.9M
63,154
2.08%
0.00%
0.00%
Bequest to Heirs
6,902
584,399
16.42%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.94%
0.00%
Fed. Est. Tax Receipts
7.31%
$1M to $4.9M
233,389
100.00%
-2.98%
Boston CBSA Tax Receipts
234,463
70.68%
629,204
100.00%
19.62%
30.06%
$
1,384,852
43.19%
Source: Calculated at the Center of Wealth and Philanthropy at Boston College using the 2011 version of the Wealth Transfer Microsimulation Model based primarily on CBSA data.
100.00%
Table 22: Boston CBSA Final Estates by Net Worth
4% Growth Scenario
$5 Million Exemption - Not Current Law
Adjusted for Recession
In Millions of Inflation - Adjusted 2007 Dollars
October 31, 2012
2007-2026
Number of Estates
Value of Estates
Neg or Zero
13,421
$
(188)
3.73%
-0.04%
$1 to $.9M
291,092
$
100.00%
Estate Fees
$
9
$
-
0.09%
$
$
-
0.00%
$
$
-
0.00%
$
$
-
20.89%
$
-
0.00%
$
3,495
0.00%
$
0.00%
$
63,624
$
2,079
1,541
0.00%
$
187
21.17%
$
$
5,337
4.83%
$
22.47%
$
78,942
$
624
1,922
0.32%
$
1,377
6.35%
$
$
3,940
6.03%
$
27.88%
$
24,503
$
524
2,363
2.37%
$
2,079
5.33%
$
$
4,911
7.41%
$
8.65%
$
18,013
$
4,533
26,063
3.58%
$
54,391
46.16%
$
$
114,199
81.73%
$
6.36%
$
98,076
514,784
100.00%
9,822
100.00%
31,889
100.00%
6.19%
93.72%
$
58,033
100.00%
11.27%
86.59%
$
38.42%
64.59%
100.00%
1.91%
18.30%
3.72%
359,578
100.00%
8.77%
17.61%
75.71%
57.74%
1.53%
7.45%
2.99%
297,261
Total
1.11%
100.00%
8.47%
12.17%
89.62%
5.42%
1.88%
4.25%
4.05%
27,890
100.00%
5.94%
6.06%
91.98%
6.29%
$10M to $19.9M
$20M or more
2,040 0.57%
3,982
1.93%
0.21%
2.65%
32,366
1.29%
100.00%
1.75%
5.05%
0.00%
17.11%
$5M to $9.9M
4,651
2.36%
0.00%
0.00%
Bequest to Heirs
2,052
88,086
12.35%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.97%
0.00%
Fed. Est. Tax Receipts
13.44%
$1M to $4.9M
44,391
100.00%
-4.94%
Boston CBSA Tax Receipts
69,170
80.95%
131,882
100.00%
25.62%
34.64%
$
32.99%
283,158
100.00%
55.01%
2007-2061
Number of Estates
Value of Estates
Neg or Zero
59,274
$
(1,247)
4.17%
-0.04%
$1 to $.9M
1,000,345
$
100.00%
Estate Fees
$
37
$
-
0.06%
$
$
-
0.00%
$
$
-
0.00%
$
$
0.00%
11.37%
$
-
0.00%
$
11,847
0.00%
$
$
214,306
91.97%
$
12,157
14,263
0.00%
$
187
20.14%
$
$
44,501
6.80%
$
$
512,523
87.82%
$
8,771
26,880
0.07%
$
7,563
14.53%
$
$
62,937
12.82%
$
$
351,064
76.78%
$ 1,577,875
8,470
36,475
2.80%
$
26,951
14.03%
$
$
112,568
17.39%
$
$
283,906
60.62%
100.00%
47.52%
$ 3,320,142
100.00%
24,063
100.00%
39.87%
$
132,097
9.99%
$
235,075
62.99%
$
$
638,331
87.14%
$
548,309
34.75%
209,715
100.00%
$
269,776
100.00%
8.13%
73.36%
40.46%
14.86%
100.00%
6.32%
14.90%
12.94%
60,360
1.82%
8.37%
24.03%
18.38%
Total
1,421,598
1.53%
5.75%
7.23%
2.12%
100.00%
7.79%
13.77%
26.83%
14.11%
1.81%
1.65%
5.11%
468,368
100.00%
5.88%
7.62%
11.22%
13.77%
$10M to $19.9M
$20M or more
33,940 2.39%
30,139
1.92%
0.03%
1.36%
457,215
4.59%
100.00%
2.44%
5.08%
0.00%
17.58%
$5M to $9.9M
65,280
2.08%
0.00%
0.00%
Bequest to Heirs
6,863
583,631
16.36%
100.00%
0.00%
0.00%
Bequest to Charity
$
2.95%
0.00%
Fed. Est. Tax Receipts
7.02%
$1M to $4.9M
232,620
100.00%
-2.98%
Boston CBSA Tax Receipts
233,014
70.37%
$
870,184
100.00%
26.21%
28.71%
$ 1,910,108
57.53%
Source: Calculated at the Center of Wealth and Philanthropy at Boston College using the 2011 version of the Wealth Transfer Microsimulation Model based primarily on CBSA data.
100.00%